HOUSES PASSES BILL TO DELAY 700 MHZ AUCTION, AS FCC ORDER NEARS

House vote is seen as providing significantly more leverage for FCC to grant CTIA request that it delay 700 MHz auctions. CTIA has asked full Commission to review Wireless Bureau decision to keep June 19 date for both upper and lower bands of 700 MHz auction. Before floor vote, FCC decision remained fluid Tues., according to numerous sources. Many industry observers expected that at least brief delay was likely, with decision out of Commission possibly coming today (Wed.) before 6 p.m. deadline for prospective bidders to file short forms. Several sources indicated, however, that even issue of when FCC would issue order on auction timing was up in air Tues. and that legal issues involving auction delay without legislative change to alter statutory mandates still were significant concern on 8th floor. One compromise scenario that apparently had traction at Commission and on Capitol Hill was one in which Ch. 52-59 auction would go forward as scheduled June 19, with Ch. 60-69 bidding delayed, several sources said. “It’s kind of a stand-off at this point,” industry source said before House vote.

Lehman Bros. said in research report issued Mon. that firm expected FCC to “reluctantly enforce a brief delay” in 700 MHz auction, even though prospects that full Congress would pass legislation by June 19 weren’t bright. Lehman note to investors said firm expected delay into 2nd half of this year or first half of next year. “We would classify a delay post-May 8 as highly unlikely,” Lehman said. “Generally speaking, FCC Chairman Michael Powell seems to have considerable personal reservations about postponing the auction, although his fellow commissioners may not entirely share the same sentiments.” It said Powell expressed concern at recent appropriations hearing about flouting statutory deadline for auction without legislative changes and that Comr. Abernathy had discussed possibility of very brief delay. Lehman speculated that “strong ties to the White House” of Comr. Martin “probably make him a supporter for delay.”

As of Tues., one issue still apparently in play on 8th floor was whether decision could be issued on CTIA application for review before close of short-form filing window today (Wed.). Commission in past has delayed auction, which for Ch. 60-69 has been put off 5 times, in at least one case after Form 175 filing window closed but before auction itself began, industry source said. If delay is decided after short forms are submitted, Commission still can return them under seal to prospective bidders without publicly releasing their identity, move that would protect auction strategies of companies, several lobbyists said. Short forms are filings in which prospective bidders notify Commission of their intent to bid, provide financial information and describe licenses for which they will vie.

One scenario under serious consideration as of Tues. was at least brief delay in auction, with expectation that short delay could last about one month, although precise window wasn’t clear. One factor apparently complicating timing of FCC decision, several sources said, is fact that all 4 Commissioners and some staff were at NCTA convention in New Orleans Tues. One expectation had been that FCC would act on CTIA’s request to delay auction before short-form filing window closed, although several industry sources said that with time running short, order might not be out until later this week.

Several industry sources said that under scenario in which FCC allowed additional month beyond June 30, statutory deadline for Ch. 52-59 still could be met if there was no movement in Congress to change it. FCC faces Sept. 30 deadline for depositing proceeds in U.S. Treasury from lower band spectrum. Deadline for upper band auction was Sept. 30, 2000. One challenge for Commission if decision is made after short form filing deadline closes is that prospective bidders would be reluctant to post upfront payments to participate in auction if it still could be cancelled close to start date, source said. Several likely bidders already face liability on successful bids in NextWave re-auction, he said. While NextWave case will be heard by Supreme Court, if ruling ultimately supported those re-auction results by siding with FCC, those re-auction winners would be responsible for nearly $16 billion they bid. Against that backdrop, “people are not willing to put large chunks of money down” on 700 MHz, source said. “Our postponement issue is we want to know which way to go as far as 700 MHz and don’t want to tie up money unnecessarily,” source said.

One issue apparently still in play at FCC even as decision comes down to wire is whether there should have been delay at all, particularly because all Commissioners have expressed some degree of concern over legal liabilities of missing statutory deadline absent legislative change, another source said. “They all take the legal issue seriously,” source said. Yet another scenario still under discussion is possibility of compromise that would keep auction time for Ch. 52-59, for which statutory deadline of Sept. 30 looms for depositing proceeds in Treasury. Sen. Stevens (R-Alaska), ranking GOP member of Senate Appropriations Committee, has positioned himself as potential dealmaker on this issue, although he has been preparing legislation that would direct FCC to move forward with auctions as scheduled. Allowing Ch. 52-59 auction has been focus of rural carriers as more optimal swath of spectrum to build out to smaller communities. Stevens also held meeting in his office Tues. afternoon to discuss possibility of NextWave settlement with re-auction winners. One industry source said House passage of bill, if coupled with FCC delay, could create window on Hill for compromise that would satisfy auction concerns of rural carriers, broadcasters and large wireless operators.