SPECTRUM HOLDINGS CHALLENGES CHANGES IN 700 MHZ AUCTION RULES
Spectrum Holdings, one of largest bidders for upcoming lower 700 MHz band auction, petitioned FCC for reconsideration of decision to let bidders select licenses to pursue other than those identified in their original short- form applications. FCC Wireless Bureau plans to hold auction for C- and D-blocks of lower 700 MHz spectrum next month. Date was rescheduled after Congress delayed planned Jan. 14 start for upper 700 MHz auction and June 19 for all of lower band, including larger A, B and E-block licenses. Legislation instead postponed all of 700 MHz auctions except for smaller C- and D-block licenses on Aug. 27.
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Bureau said bidders for remaining auction could choose additional licenses and supplement upfront payments between July 22 and 26. Rationale for letting bidders choose wider pool of licenses was that qualified bidders couldn’t have anticipated statutory changes at time they made original license selections, bureau said. To comply with new law, Commission isn’t allowing bidders to compete other than those already qualified for June 19 auction. In its petition, Spectrum Holdings objected to FCC decision to retroactively change rules for license eligibility in auction, arguing Communications Act barred Commission from retroactively changing auction procedures without prior notice and comment.
Earlysville, Va.-based Spectrum Holdings in May submitted $40 million upfront payment to FCC to participate in lower 700 MHz auction. That made it eligible to bid simultaneously on 12 MHz of spectrum on either A, B or C- block licenses or on both D- and E-block licenses, covering entire U.S. Only one other bidder, Council Tree Wireless, was eligible to vie for nationwide spectrum block, Spectrum Holdings said. Council Tree and Spectrum Holdings submitted largest upfront payments for lower band bidding, with Council Tree also paying $40 million. Spectrum Holdings is headed by Thomas Jones, former founder and pres. of WNP Communications, which was major holder of LMDS spectrum, having won licenses in 11 of top 15 cities.
Because of “retroactive changes” in auction eligibility requirements for those licenses, company said it was “facing the uncertain prospect of participating in an invalid auction against additional bidders for C- and D-block licenses, who were handed an unprecedented, postdeadline opportunity to obtain additional bid units.” Citing Sec. 309(j) of Communications Act, petition said Congress directed FCC to adopt safeguards to ensure adequate time would be allowed to permit comment on proposed auction procedures and, after rules were issued, to allow companies time to develop business plans, assess market conditions and evaluate equipment availability.
Fast-tracked auction legislation backed by House Commerce Committee Chmn. Tauzin (R-La.), which passed Congress last month, directed FCC to limit bidders eligible to participate in C- and D-block auction to those who already were qualified to bid in what was then June 19 auction of lower band. Public notice on Aug. 27 auction indicated that Wireless Bureau waived, “on its own motion the prohibition against changes in the license service areas identified on the qualified bidder’s short-form application as licenses on which the qualified bidder intends to bid.” Spectrum Holdings objected to that change and similar one that allows qualified bidders to increase upfront payments. Company said Sec. 309(j) of Communications Act “prohibits retroactive auction rule changes by agency fiat.” Bureau “abrogated requirements for establishing eligibility after 128 bidders had relied on, and complied with, those requirements to establish their maximum eligibility,” petition said. Because Congress didn’t specifically authorize FCC to permit change in maximum eligibility of those bidders, bureau “was not empowered to permit such a change sua sponte by issuing post- deadline ‘waivers,'” petition said.
“If Congress had wanted to give the FCC the flexibility to completely rejigger the rules, they would presumably have given them more time to restart the auction,” Jones told us Wed. “It seems pretty clear with the underlying legislation and the intent of Congress that these are very substantial changes. The idea of changing what licenses a bidder can bid on and how many licenses is a fundamental change in the eligibility.” Company wants FCC to rescind its waiver of rules that would allow qualified bidders to increase number of licenses on which they were bidding or amount of upfront payment. Spectrum Holdings also asked Commission to reconsider July 3 deadline for qualified bidders to request refund if they chose to leave auction entirely.