Results Show DE Auction Rules Fatally Flawed, Say Designated Entities
FCC auction results show why designated entity rules approved prior to the AWS-1 auction two years ago should be scrapped, said Council Tree, Bethel Native Corp. and the Minority Media and Telecommunications Council. In a Friday filing to the Third Circuit Court of appeals, the three detailed their objections. The DEs want the Third Circuit Court of Appeals in Philadelphia to vacate results of the AWS-1 and 700 MHz auctions.
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“In the FCC’s recent landmark sale of $19 billion of 700 MHz spectrum licenses in Auction 73, DEs won just 2.6 percent of licenses by dollar value, representing a precipitous drop from historical levels,” they said. “Similarly, less then two years earlier in the FCC’s $14 billion sale of Advanced Wireless Services licenses in Auction 66, DEs won just four percent of the dollar value of the licenses sold. Both of these auctions represent DE winning bid percentages far below the level of success experienced by DEs in the past.” DEs won 70 percent of licenses by value in six previous auctions, they said.
“The elapsed time this past year has seen critical new facts emerge to materially strengthen our case,” George Laub, managing director at Council Tree, told us Friday. “One of these is the Auction 73 results which paint a really clear picture, again, of the harmful affects of the new DE rule… This string of DE failures in Auctions 66 and 73 ultimately translates into a tremendous set-back for U.S. wireless consumers. A vibrant DE program, free of the Commission’s harmful new DE rules, would have ushered in another era of new competition and innovation in wireless.”
The DEs submitted data showing that in the 700 MHz sale, the top 70 licenses sold brought $15.2 billion, 80 percent of the auction’s proceeds. DEs won none of those licenses. AT&T and Verizon Wireless, meanwhile, bought licenses worth $16 billion, or 84 percent of the auction by value, the DEs said.
DES warned the court before the August 2006 AWS auction that the new DE rules would discourage participation, the DES’ supplemental filing said. The FCC countered that the rules would not “materially impact DE participation” in the auction, the DES said. “There is ample evidence of the substantial deficiencies in, and far reaching negative consequences of, those rules” the pleading said.
Frontline Wireless, formed to pursue a bid for the 700 MHz D-block, launched a “prolonged and aggressive campaign” against the 50 percent rule set by the FCC before the AWS-1 auction, the DES said. Under that rule, a DE forfeits bidding credit if it leases, resells or wholesales more than half the capacity of the spectrum it buys within 10 years of buying a license. The FCC issued Frontline an “11th hour” waiver, but “it was too little, too late even for that beneficiary,” the DES said.