Open Market for EBS Licenses

May 1, 2021

Until 2020 there was no open marketplace for EBS licenses. The FCC previously gave EBS licenses to educational institutions, at no cost. They allowed the institutions to lease their spectrum to wireless operators. But schools weren’t allowed to sell the license itself. It was like the owner of a house could only rent her property to paying tenants — but couldn’t sell the house outright.

“As the FCC emphasized, the decision about whether to lease or sell a license remains with the licensee, who retains control of decisions about how the license is to be used…and to whom to transfer or assign the license.”

— Communications Law Counsel – Ash Johnson, white paper, Aug 2020

In April 2020 the FCC changed these rules to allow educational institutions to offer and sell their EBS licenses to any buyer prepared to pay what the institution believes is fair market value. Now any owner of EBS licenses can sell their license qualified commercial buyers. It’s like the house owner suddenly being able to sell her house, after years of home prices surges that she previously couldn’t benefit from. EBS license holders are now able to realize a major cash windfall, exploiting the price appreciation in the spectrum market over the past decade.

When an institution sells its EBS spectrum license, the terms of the underlying lease remain unchanged for the wireless operator (lessee) making the monthly lease payments.  This is similar to the house owner who sells her house, but preserves the rental agreement for her existing tenant. The tenant pays his rent check to a new owner, but is otherwise unaffected. Likewise, for EBS leases — the wireless operator retains the lease, but simply makes the monthly payment to the new owner.

So, what does all this mean for colleges and other institutions who own EBS licenses? The rule change enables license holders to unlock an immediate cash lump sum that may be more than the total remaining lease payments. And most important, unless specifically precluded, having an existing lease DOES NOT prevent EBS license holders from selling. The FCC rule change allows a License sale while protecting the underlying lease. Ultimately, it’s similar to selling your rental house; the tenants continue to live there, they’re just making their rent payments to the new owner.

What’s the process of selling an EBS license? It’s not complex, but should be handled by your attorney, ideally one with experience navigating the FCC process. Step 1 is to get an offer for your license(s) from a bona fide spectrum buyer or investor. Step 2 often requires giving the existing lessee notification that may include observing rights such as first refusal, since most leases have such a provision. The lessee typically has 30 days to make the Buy or Don’t Buy decision. Then the sale – either to the lessee or to the third-party buyer – can be transacted and approved by the Federal Communications Commission. Once the license sale is approved (“consummated’) by the FCC, the license is transferred to the new owner. The lease remains essentially unaffected, except now the monthly lease payments are made to the new owner.

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