Rep. Towns (D-N.Y.) raised the possibility Wed. of setting timelines for spectrum auctions to provide more certainty about the funds available for a digital trust fund to promote technology and education programs. However, proponents of a Digital Opportunity Investment Trust (DOIT), including former FCC Chmn. Newton Minow, couldn’t address the desirability of setting timelines at a hearing of the House Commerce Telecom Subcommittee Wed. Minow said his understanding was that the FCC had set 2 auction dates but that further auctions would depend on how soon the Dept. of Defense vacated spectrum. Towns said setting a time for the auctions would help determine how much money would be available for the trust and sought the views of witnesses on whether congressional action would be desirable. Committee Chmn. Upton (R-Mich.) wanted to know from the witnesses whether they had any revenue projections from the sale of spectrum that would go into the trust. The only known figures were $5 billion from the 700 MHz auction and triple that amount from the 3G auction, he said. Minow said his projection of $20 billion was estimated to come over the years and only the interest from the fund was proposed to be used for technology and education programs. Backing the proposal for a trust fund, Upton said in today’s global marketplace, children and workers of all ages should be equipped with high-tech skills to remain competitive with the rest of the world’s work force. It was proposed that 30% of the proceeds from spectrum auctions be invested in DOIT for digital education and technology programs and for Telecom Development Fund (TDF) enhancement, a portion of the winning bidders’ down payments would be added to TDF’s existing funding for investment in new-technology ventures, he said. The proposals also call for “walling off” spectrum auction proceeds from the normal budgetary process, Upton said. However, while funding DOIT, the question of whether it would preclude funding for other programs such as veterans benefits, highway construction, homeland security and agriculture disaster support had to be considered, he said. Ranking member Markey (D-Mass.) said the issue was not merely one of “whether we can afford it.” Millions of jobs were being lost and companies were outsourcing software jobs to countries such as India and those were real challenges that needed to be tackled, he said. To a question on possible anticompetitive concerns relating to DOIT raised by Rep. Shimkus (R-Ill.), Minow said the “impressive” list of companies, especially technology firms, that had supported the DOIT proposal should set such concerns at rest. Businesses know that more education would bring them more success in the marketplace, he said. Former National Science Foundation Chmn. Eamon Kelly said DOIT would lead to increased competition in the same way that the National Science Foundation had stimulated competition and economic activity.
The Satellite Industry Assn. (SIA), in a letter to Senate Commerce Committee Chmn. McCain (R-Ariz.), disputed Northpoint Technology statements about its treatment by the FCC. SIA disputed Northpoint’s claim that it was at a regulatory disadvantage to satellite providers. In an Oct. letter to McCain, Northpoint said Multichannel Video Distribution & Data Services (MVDDS) should be exempt from spectrum auctions because they would provide a competing service to satellite DBS providers (CD Oct 30 p14). Northpoint is lobbying for amendments that would grant such an auction exception. One such amendment was added to the Senate Commerce Justice State appropriations bill (S-1585). “Northpoint’s assertion contrasts sharply with the position of the Honorable [FCC] Chairman Michael Powell, who indicated in an October 23, 2003, letter to you that the last decade has seen ‘explosive wireless growth, innovation and competition,'” the Nov. 11 letter said. SIA also said that while the FCC hadn’t held an auction for domestic DBS licenses in more than 6 years, the Commission had auctioned satellite licenses in another domestic satellite service, including the Digital Audio Radio Satellite (DARS). The FCC also will auction several DBS orbital positions soon, the letter said. SIA said Northpoint also was wrong when it said the FCC had given Boeing spectrum without auction. The FCC didn’t give Boeing spectrum in the 12.2-12.7 GHz band, as SIA said Northpoint reported, and the spectrum award was analogous to satellite earth stations, which also aren’t auctioned.
Rep. Stupak (D-Mich.) introduced a bill Tues. designed to improve public safety communications interoperability. His proposed Public Safety Interoperability Implementation Act would establish a Public Safety Communications Trust Fund to be administered by NTIA in collaboration with the Dept. of Homeland Security (DHS). Stupak told the House that DHS was “still sluggish in responding to the needs of our nation.” NTIA, with its telecom expertise, is better prepared to address the interoperability issue, he said. The trust fund would authorize up to $500 million per year through the standard appropriations cycle. After 3 years, the trust fund would receive up to 50% of net revenue from spectrum auctions. Reps. Fossella (R-N.Y.) and Engel (D-N.Y.) are co- sponsors.
Concerns about the cost of spectrum auctions, and potential lack of congressional oversight, are what prompted the Senate Appropriations Commerce Justice State (CJS) Subcommittee to cut the FCC’s current source of funding for auctions (CD Sept 11 p1), sources said. The FCC uses an auction fund created from the proceeds of auctions, but S- 1585, the CJS Appropriations bill, would prohibit the Commission from using the fund, which some have said could jeopardize the auction program. A spokesman for Sen. Hollings (D-S.C.), the CJS Subcommittee ranking Democrat, said the measure was pushed by Subcommittee Chmn. Gregg (R- N.H.), but also was supported by Hollings. A Senate source said the auction funding was likely to be returned before Congress finalized its CJS spending measures.
Should Congress approve the so-called Northpoint amendment to the spectrum relocation trust fund legislation (HR-1320), it would “deal an unfortunate blow to the FCC’s efforts to move toward a more market-oriented and flexible spectrum regime that benefits the public at large,” said Randolph May, Progress & Freedom Foundation (PFF) Dir.- Communications Policy. The Senate Commerce Committee added the Northpoint amendment over the objections of Committee Chmn. McCain (R-Ariz.). House Commerce Committee Chmn. Tauzin (R-La.) said he would try to remove the amendment during the conference on the bill, which hasn’t yet been addressed by the full Senate. The amendment would give Northpoint spectrum in the 12.2-12.7 GHz band without going through an FCC auction. In a column for CNET News.com, May said: “Even though spectrum auctions may not always be appropriate… they are useful in moving in a free market direction. The prime reason: They are ways to place spectrum in the hands of those entities that value it most highly.” May said Northpoint was using a “furious lobbying campaign” to overturn the FCC’s decision to auction the spectrum. Part of the problem, May said, rests in Congress’ 1927 decision to bar private ownership of spectrum. “As long as government takes the position that it owns the spectrum and private parties use it only at its sufferance through limited licenses, spectrum allocation and assignment decisions will be subject to a certain degree of political maneuvering,” May said. Northpoint’s effort to obtain a “pioneer exemption” ignores the fact that Congress abolished that standard because of the difficulty of making licensing decisions on “bureaucratic judgments concerning innovativeness,” he said. Also, May said Northpoint shouldn’t be given spectrum that competitors have paid for. However, Northpoint responded that it was arguing for equal, not special, treatment. Antoinette Bush, Northpoint exec. vp, said DBS outlets didn’t have to go through auction.
The Telecommunications Development Fund (TDF), set up by Congress to help small communications firms get started, has spent nearly as much on salaries as it has investing in companies, according to an investigation by the Center for Public Integrity. The study released late Wed. said TDF paid $7.25 million in executive salaries and administrative costs from 1998 through 2001 while investing $9.4 million in 7 companies. The center also questioned why FCC Chmn. Powell appointed himself to the board, saying there could be conflicts in the top regulator’s having involvement in a venture capital fund. An FCC spokesman noted that the Telecom Act, which created TDF, required the FCC to have a representative on the board, along with representatives of the Small Business Administration and the Treasury Dept. and 4 public members. Then-FCC Chmn. William Kennard also was on TDF, the spokesman said. TDF is funded by interest payments on up-front deposits paid by companies participating in spectrum auctions. The study also said TDF CEO Ginger Lew, ex-Small Business Administration, was paid $245,000 in 2001 and said she had connections to John Huang, who was involved in a campaign finance scandal during the Clinton Administration that was known as China-gate. The center’s news release quoted Lew as saying her only connection to Huang was that they worked at the Commerce Dept. at the same time. The center also questioned why the board of directors and its advisory board were almost entirely made up of representatives of large companies, saying there should be input from small business representatives.
The House is scheduled to take up the spectrum trust fund legislation at 10:15 a.m. today (Wed.) The bill, which is on the suspension calendar, is expected to pass. A suspension bill must have no amendments and get 2/3 of House votes. At introduction of the bill, some House Commerce Committee members expressed concerns that appropriators might interpret the bill as usurping spending authority from the Appropriations Committee. The proposed Commercial Spectrum Enhancement Act (HR-1320) by House Telecom Subcommittee Chmn. Upton (R-Mich.) would create a trust fund paid for through spectrum auctions that would help reimburse govt. agencies that relocated to new spectrum bands, thus making more spectrum available for commercial usage. The Commerce Committee passed the bill April 30 on voice vote (CD May 1 p1). House appropriators will pose no objections to the bill, an Appropriations Committee spokesman said. A spokesman for Upton said little opposition to the bill was expected, as did other House sources. However, the timing of the bill could pose problems for the Telecom Subcommittee. It has scheduled a hearing on emergency responder spectrum issues at 11 a.m. in Rm. 2322, Rayburn Bldg. Upton’s spokesman said if the bill was addressed at or around 10:15 a.m., it should be passed by the time the hearing began. A markup of similar legislation in the Senate Commerce Committee is tentatively scheduled for June 19. That bill (S-865) by Senate Commerce Committee Chmn. McCain (R-Ariz.) was taken directly from the House version after it passed the Telecom Subcommittee markup (CD April 10 p1). Commerce Committee spokesman Ken Johnson said that despite the fact that members were upset about the Congressional Budget Office price tag for the bill of $2.5 billion over 10 years, it still fell within budget parameters and avoided potential confrontation with House appropriators. “We've got the votes,” Johnson said. He also said the committee was optimistic about similar legislation in the Senate.
NextWave sought approval from a bankruptcy court Fri. for a $150 million partnership agreement with investment firm Clarity Partners to work on new spectrum acquisitions. The proposed acquisition venture, called IPCom, which Clarity would form and fund, came amid continued speculation that NextWave was nearing a deal to sell Cingular Wireless 20% of its PCS licenses for nearly $1.4 billion. Clarity is a Beverly Hills-based private equity firm that focuses on media and telecom investments and has holdings in Oxygen, PrimeCo and MetroPCS.
The FCC said Thurs. it had adopted an exemption for rural telephone cooperatives from a revenue attribution requirement for small business preferences in Commission auctions. Chmn. Powell and Comr. Adelstein said the changes were designed to cure the “mistake” of rural cooperatives’ not being carved out from the auction attribution rules. Those rules were designed to bar large companies from manipulations so they could qualify as small entities for certain benefits, such as bidding credits. The agency said the step was designed to “increase the ability of rural telephone cooperatives to participate in spectrum auctions and provide service in rural areas.” The exemption involves the requirement that the gross revenue of entities controlled by an applicant’s officers and directors be attributed to the applicant when determining eligibility for small business preferences, such as bidding credits. The exemption is available to prospective auction participants under certain conditions: (1) The applicant is “validly organized” as a cooperative under state law. (2) The gross revenue and other financial and management resources of the affiliates of the applicant’s officers and directors aren’t available to the applicant. (3) The applicant is a rural telephone company as defined by the Communications Act. (4) The applicant is eligible for tax-exempt status under the tax code. Powell and Adelstein said: “Unfortunately, our rules have not always appreciated their unique structures and roles.” They said the FCC’s attribution rules, which require that gross revenue of entities controlled by an applicant’s officers and directors be attributed to the applicant, are important. Those rules bar applicants from obtaining bidding credits that are more favorable than justified, they said. “The rule as crafted, however, had the unintended consequence of attributing to rural telephone cooperatives the gross revenues of the outside business interests of its officers and directors even though these officers and directors do not control the cooperatives,” they wrote. Such cooperatives usually are controlled by member-subscribers and are nonprofit entities, Powell and Abernathy said. Comr. Martin in a separate statement said: “I am hopeful that this will enable greater participation in spectrum auctions by rural cooperatives and will provide greater rural deployment of wireless services.”
The Office of Communication of the United Church of Christ (UCC) opposed a recent request to the FCC by WorldCom for a ruling that SkyTel and its other wireless affiliates could participate in May 13 spectrum auctions. At issue is whether SkyTel qualifies to compete in a paging band auction amid questions over the default status of 2 Multipoint Distribution Service licenses held by Wireless One, which is another WorldCom affiliate. FCC rules say that bidders are eligible to take part in an auction only if they have satisfied outstanding installment payment defaults. WorldCom sought a ruling that its wireless subsidiaries were in compliance with the auction eligibility rules or a waiver of those rules. UCC told the FCC Fri. that WorldCom “committed massive fraud resulting in the largest bankruptcy in U.S. history. It would be simply unfair to allow WorldCom, a company known to operate fraudulently, to participate in future FCC auctions without fully complying with the FCC’s auction eligibility rules. To do so would eviscerate the purpose of the FCC’s auction eligibility rules, which in part are to deter speculation and insincere bidding as well as to ensure that a particular authorization goes to the auction participant that values the authorization most.”