EBS Lease Provisions What New Rules Mean For Your EBS License

New Federal Communications Commission (“FCC”) rule changes to the Educational Broadband Service (EBS) spectrum band allow EBS licensees greater flexibility to lease, assign and transfer their licenses.[1] Most notably, the new rules eliminate the EBS educational eligibility restriction and allow EBS licensees to freely sell their EBS licenses to non-educational entities.[2] Despite these changes in FCC rules, many EBS leases still contain restrictive covenants that could make “freely selling” licenses seemingly difficult for educational licensees. While every EBS lease contains unique language, below are our general observations regarding potential issues surrounding EBS assignments. Please note that these are general observations, and should you desire to assign or sell your EBS licenses, you should consult legal counsel. The general comments contained herein do not constitute legal advice, nor do they create an attorney/client relationship.

– An EBS licensee most likely can sell its license even if it is leased. The FCC’s new rule changes do not affect the validity of existing leases,[3] however, the EBS licensee likely can sell its license to another party subject to the lease. A licensee should examine the “Assignment” provisions in its lease to determine whether consent of the lessee is required prior to entering into a sale.

– An “Exclusivity” clause in an EBS lease generally applies to the use of capacity on the frequencies and not to the license itself. While the EBS licensee may be able to sell its underlying license, it may not be able to sell or lease the rights to use the capacity on the channels during the term of the lease.

– A “Right of First Refusal” clause does not necessarily mean that a licensee cannot sell its license to a third party. Instead, it generally means that if a licensee receives an offer to buy the license from a third party, the licensee must provide the lessee an opportunity to match or beat the offer. If the lessee cannot match or beat the third party offer, then the licensee generally would be able to sell to the third party.

– A “Right to Participate” clause generally seems to apply to the channels and requires that if a licensee solicits bids or offers for the sale of the channels, then it also must provide its lessee an opportunity to submit a bid or offer.

– A “Confidentiality” clause does not preclude an EBS licensee from seeking legal counsel to review its lease and likely does not prevent a licensee from providing information to a potential buyer.

These new rules went into effect on April 27, 2020. Since then, we have become aware of buyers actively looking to purchase EBS licenses. If you have any questions or would like us to review your EBS license or lease to determine what options you may have to monetize your license, please let us know. If you would like to discuss this in greater detail, please contact Clare L. Andonov at [email protected]

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[1] See Transforming the 2.5 GHz Band, Report and Order, 34 FCC Rcd 5446 (2019).
[2] Id., ¶ 15 (“both incumbent EBS licenses and new EBS licenses once issued will be free of the eligibility restrictions, and EBS licensees may assign or transfer their licenses freely.”).
[3] Id.