AUCTION RULES MUST CONTINUE TO PROTECT DES, COUNCIL TREE SAYS

But CTIA countered that “significant market changes” have occurred in the wireless industry that should lead FCC to no longer impose DE requirements in the critical 1.9 GHz auction scheduled for next year. Sources said Fri. the FCC has shown little inclination to tamper with the auction rules; nevertheless both sides asked for changes in comments that were due Thurs. at the FCC. The Wireless Bureau said last month the Jan. 12, 2005, auction will largely follow rules established for Auction 35 in 2000-2001 (CD June 18 p3).

Council Tree said the DE requirements should be strengthened, if anything, by imposing a “personal net worth test,” which could guarantee that only legitimate DEs are allowed to bid for the designated licenses. “The personal net worth test will ensure that the DE program encompasses only those who legitimately need a lower barrier in order to enter the wireless marketplace,” the company said.

The company pointed out that based on MHz per population the amount of spectrum to be sold in Auction 58 is 39% less than what was offered in the original attempt to auction NextWave spectrum -- Auction 35. A DE source noted Fri. that exacerbating the problem was that many licenses sold by NextWave to Cingular were closed licenses, available only to DEs, as were many of those retained by NextWave.

“The Verizon Wireless and CTIA comments raised nothing new and completely overlooked industry consolidation,” said an attorney who represents DE interests. “The DE community has spoken up loudly and clearly in favor of the DE rules.”

CTIA had previously weighed in strongly in opposition to the proposed rules for the auction. The association said it was pleased that the FCC has scheduled an auction. “The Commission, however, should establish fair and reasonable auction rules that will allow the broadest possible group of bidders to participate in Auction 58,” CTIA said. “In order to do this, the Commission should re-examine and consider removing or waiving the entrepreneur eligibility restrictions under… its rules so as to permit open bidding for all C block licenses.”

CTIA contended: (1) Substantial blocks of “premium” C block spectrum have remain unused despite a shortage of suitable MMRS spectrum. (2) The capital market has “changed significantly” as the wireless industry matures to make loans more available. (3) Bidding credits and other regulatory measures are more effective in promoting bids by small companies than set-asides like the DE mandate.

Verizon Wireless said the “fundamental flaw” in the Wireless Bureau’s notice announcing the auction was the failure to seek public comment before imposing Auction 35 rules. Without considering the legal or public interest ramifications of this prohibition, the Bureau would exclude many carriers from bidding on more than 1/2 the licenses included in Auction No. 58.”

CTIA Pres. Steve Largent said: “We think every carrier should be able to bid for the spectrum that they need. The FCC’s proposed auction process in this case significantly increases transaction costs and no one benefits from that, including consumers.”

Designated Entity Program Supporters, representing minority groups, said the DE set-aside remains significant. “In today’s telecom industry… barriers to entry, including licensing requirements, make it especially difficult for small firms to secure a foothold,” the coalition said. “While there may be industries in which barriers to entry are insurmountable, there is nothing inherent in wireless technology that should limit the industry to large companies.”