FCC EXPECTED TO REJECT CHANGING AUCTION RULES
The FCC is expected to release a public notice as early as today (Fri.) establishing an auction starting in 6 months of 2,400 MHz of spectrum divided among multiple locations, including spectrum returned by NextWave. Major wireless carriers made a last-min. push to open all licenses to all carriers and do away with designated entities (DE) restrictions. But those efforts largely fell flat in recent days, sources said.
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The Wireless Bureau, working with top staffers for Chmn. Powell, has decided to follow the rules devised for Auction 35, which means that about half of the spectrum wouldn’t be available to major carriers, said an attorney who has done extensive work on auctions. “My sense is it will follow the current rules in terms of having some licenses open only to DEs,” the source said. “The Commission wants to get this moving. They want to have the auction in January 2005. They don’t want to have to do a rulemaking” proposing new auction rules.”
An industry source said major carriers view this auction as critical and don’t want to have to partner with smaller companies just to bid for about half the licenses. “This is the best spectrum that’s going to be available in the near future and to restrict half of it is just mind boggling,” the source said. “All the carriers want is for the Commission to ask questions about eligibility and to be able to make their case.” The source said the issue is not delaying the auction: “It’s about getting it right, finally, even if it takes just a wee bit more time.”
Carriers had lobbied the Commission to issue a Commission-level rather than the bureau-level notice, which would have provided some room for the FCC to change its rules. Carriers view the auction as providing important “fill-in” spectrum to improve coverage and fill out existing footprints.
The spectrum in the 1.9 GHz range is considered prime spectral real estate. It’s the same spectrum band Nextel hopes to get as part of the 800 MHz rebanding plan and the same spectrum NextWave will sell in private sales, with what are seen as very high reserve prices.
The notice is expected to pose questions about procedures, reserve prices, and other issues, but those questions are the type the bureau usually asks under its delegated auction authority. Carriers who don’t want to see DE restrictions are likely to raise strong public protests and the Commission could reverse itself before the auction.
The FCC plans to auction 155 10 MHz blocks returned from NextWave and about 80 more from other carriers that have turned in licenses. In most large cities, based on what was returned just by NextWave, three 10 MHZ blocks will be for sale. A few cities, in particular Milwaukee and St. Louis, may have less spectrum offered.
Auction 35 took place Dec. 2000-Jan. 2001 when the Commission for the first time tried to sell the NextWave licenses. At that time, it designated 170 of 422 licenses as “closed” and available only to DEs, in a move aimed at giving small carriers more of a shot at obtaining licenses. Of the 88 bidders, 54 qualified as DEs.
Carriers said the Auction 35 rules forced them in some cases to partner with a DE to bid for some blocks. The number 2 bidder based on amount bid was Alaska Wireless, affiliated with AT&T Wireless. Number 3 was Salmon, affiliated with Cingular.
The number of licenses that will be open vs. restricted this time is unclear. Larger cities will provide a more open auction than smaller. Under the rules set up for Auction 35 in markets larger than 2.5 million, 20 MHz was offered to all bidders and 10 MHz to DEs. The ratio reversed for markets below the cut off. Some cities have changed categories since Auction 35. Pittsburgh, which lost population in the 2000 Census, is now in the smaller market category, sources said. San Diego and Denver both joined the large market group.