FCC Scrutinizing Carrier-DE Ties in Advance of Rulemaking
Ties between major carriers and designated entities (DEs) are coming under the Wireless Bureau microscope against a backdrop of long-pending action on a further notice of proposed rulemaking on DE issues. Late last week, that NPRM began to circulate on the 8th floor. But, due to an Aug. 2005 FCC agreement to launch an NPRM before a summer 2006 advanced wireless services (AWS) auction, FCC staffers already are asking more questions about relationships between carriers and DEs, industry and FCC sources said. The NPRM would go a step further and prohibit some relationships altogether.
Sign up for a free preview to unlock the rest of this article
Communications Daily is required reading for senior executives at top telecom corporations, law firms, lobbying organizations, associations and government agencies (including the FCC). Join them today!
Heightened heed to carrier-DE relationships is slowing Wireless Bureau review of so called long form applications from DEs winning licenses in Auction 58, which ended in Feb. 2005 and raised more than $2 billion, industry sources said. Long forms by DEs linked to the largest carriers seem to take the longest to pass FCC muster. The bureau has yet to okay a submission by Vista PCS, controlled in part by Verizon Wireless. Jan. has seen the bureau clear an application by Carroll Wireless, affiliated with U.S. Cellular, in Dec.; the bureau cleared one by Royal Street, affiliated with MetroPCS.
Throughout, Wireless Bureau staff have had to consult with 8th floor staff on commercial relationships between DEs and carriers, with an eye on what the FCC should permit. FCC releases accompanying approved long form applications shed no light on the questions posed or the nature of the inquiry.
With Royal Street, for example, the FCC focused on what comprises a permissible “wholesale-retail” tie between a DE and a carrier, sources said. A case getting even more review involves Sprint and DE Wirefree Partners, which have proposed that Wirefree essentially lease licenses it is buying back to Sprint. The FCC okayed the license transfer to Wirefree but not the Wirefree/Sprint lease. Sprint had no comment Tues.
“What the Commission has done is sort of taken a step back and said, ‘How have we handled this in the past and is that right -- if someone focused hard would we be comfortable with it?'” said a regulatory attorney who involved in one of the submissions: “The fact that something has been done over and over before is not on its face enough.”
“The Auction 58 approval process for DEs seems to have taken significantly longer,” a 2nd industry source said. “The NPRM would altogether preclude national carriers from partnering with Des… Right now such partnerships are absolutely permitted within the rules.”
DE Council Tree last week asked the FCC to prohibit ties between major carriers and DEs in locales where a carrier already has spectrum. The same week, Council Tree held several meetings at the Commission, including one with Comr. Adelstein. Council Tree said FCC auctions could trigger a wave of bad publicity if DE rules aren’t tightened. In Auction 58, “national carriers used DEs to acquire 71% of their spectrum,” even though “national carriers have zero need of government assistance,” Council Tree said. Council Tree said it has information showing that in Auction 58 “four wealthy individuals, masquerading as DEs,” bought 64% of total DE licenses with a value of more than $1 billion. “These are wealthy individuals with cozy ties to senior management of national carriers - more great fodder for press expose,” the company said.
A Dec. Wall Street Journal article on 1996’s C-Block PCS auction explained how that auction spawned a suit accusing Lynch Interactive Chmn. Mario Gabelli of using fronts to buy licenses he and his associates wouldn’t have gotten without the small-business designation the fronts had (CD Jan 3 p1).
In Aug., when the FCC modified AWS rules, Comrs. Copps and Adelstein stressed their commitment to a DE proceeding. “Our largest auction in many years is going to be held in June,” Copps said in Aug.: “We need to put this NPRM out immediately, compile the record, and develop whatever action plan may be necessary if it is determined that new protections are needed for the DE program -- well before the auction is held.”