WIRELESS CARRIERS, DESIGNATED ENTITIES FIGHT OVER AUCTION RULES
Wireless carriers told the FCC “ample” evidence exists for the Commission to launch a rulemaking on Auction 58 to decide whether to change the rules giving designated entities (DEs) a set-aside for some licenses. But DEs disagreed, saying the numbers demonstrate they would win few licenses at auction without the set-aside.
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The proposed auction, scheduled for Jan., will provide a key opportunity for carriers to buy PCS spectrum as the FCC resells licenses returned by NextWave and other carriers. So far, the FCC has shown little inclination to consider revised rules, several sources said, but CTIA and its members are continuing to press their case. The comments are on a CTIA petition seeking a rulemaking.
T-Mobile, a national carrier expected to be an active bidder in Jan., argued in support of CTIA. “The Commission’s restrictive C and F block bidding rules were created at a time when the future evolution of the mobile services marketplace was undefined and governed by a cellular duopoly,” T-Mobile said. “The set-aside rules were a reasonable attempt to diversify ownership of mobile services facilities. With the benefit of today’s historical perspective, however, these regulations are no longer justifiable either as a matter of public policy or economics.”
Verizon Wireless said not taking action on CTIA’s petition would be unacceptable. “CTIA has clearly outlined the considerable change in the marketplace since 2000, and the shortage of suitable spectrum to meet the increased demand for service,” the carrier said: “If it is true… that circumstances have changed, then the Commission is obliged to actively review whether these changed circumstances require it to amend its rules. It cannot, as many parties urge, simply decide the impact of such changes through inaction.”
Verizon said “nowhere in the record” have DEs demonstrated that the set-aside has led to service to the public that would justify its continued existence. “If facts exist that show that the set-aside program has been a success and that would justify the Commission keeping a set-aside for designated entities, the Commission must first seek these facts, examine them and make an active decision to retain… restrictive bidding rules.”
But Council Tree, a leading DE, said its analysis of past auctions shows that the set-aside has made a significant difference in helping DEs emerge as auctions. Council Tree analyzed how DEs fared in 50 auctions. The company found that DEs won $16.5 billion worth of licenses, or 100%, in closed broadband PCS licenses. But in auctions with dominant large bidders and bidding credits they won only 19% based on value. That figure drops to 6% if outlier bidder Salmon is excluded. Council Tree said in auctions without credits or set-asides, DEs won 1% of licenses based on value.
“There are dozens and dozens of DE success stories growing out of these opportunities,” a DE source said: “We think CTIA is making a mountain out of a molehill. The Auction 58 closed licenses total about 1 billion MHz POPs. It’s a small faction of the overall broadband wireless spectrum. It makes us wonder if this isn’t about something else, namely eliminating future competition.”
Among other DE interests that filed, Arctic Slope argued that the DE set-aside provides women and minorities a “meaningful” opportunity to participate in auctions: “The action requested by CTIA would be a significant setback to the modest progress DEs have made in the industry.” Designated Entity Program Supporters argued the set-asides “are needed to achieve the Commission’s mandate to promote diversity in license ownership and to reduce the barriers, such as lending discrimination and other barriers to accessing capital, that prevent small and minority and women- owned businesses from entering the spectrum market.”
Motorola supported the CTIA petition, saying “the commercial wireless services industry has changed dramatically since the FCC originally adopted eligibility restrictions for Broadband PCS C and F-block licenses.”
In another filing, the Rural Telecom Group and OPASTCO jointly disagreed with arguments by the Rural Cellular Assn. in favor of ending the DE set-aside (CD Aug 2 p1). “The upcoming auction will provide rural carriers with a meaningful opportunity to acquire additional spectrum, which will continue to allow rural companies to develop innovative services for the benefit of wireless consumers living in rural America,” the rural groups said. “Indeed, the Commission’s enforcement of the DE rules as they relate to the auction of PCS spectrum is entirely consistent with its ongoing effort to promote the rapid growth and efficient deployment of quality spectrum-based services in rural areas.”