While the two-month delay of the entrepreneur block auction gave some designated-entity companies more time to wheel and deal for funding and allies, one businesswoman said investors slipped away from her in favor of small-business designated companies.
“The auction stay diverted attention away from women and minorities to small businesses,” commented Zoe Hazen, president of female-owned Windkeeper Communications Inc. “Others wanted to just keep you on hold through indecisiveness. I began scaling back my vision from several different markets to one market,” Hazen said.
The DE personal communications services auction, originally scheduled for June, was rescheduled for Aug. 2. The stumbling block was a lawsuit filed in February by Telephone Electronics Corp., which challenged auction rules that give financial preferences to minority- and female-owned businesses. The case was dropped voluntarily last month and the court stay on the auction lifted.
An attempt by Consolidated Communications Inc. to intervene in the TEC case and keep it alive was denied by the court on May 1. Consolidated is a holding company for an Illinois rural telephone company.
John DeFeo, president and chief executive officer of U.S. AirWaves, said his company made some inroads during the extra time. The Bellevue, Wash.-based group qualifies as a small business DE.
“We used the time to work on strategic investors that take more time to develop and we were successful with an international investor. We also used the time to get our auction tools together. It (the delay) was beneficial, but we didn’t need the anxiety,” DeFeo said.
The Federal Communications Commission will auction 493 PCS licenses in the 2 GHz band; the deadline for filing short-form applications is June 15.
John Nguyen, president of minority-owned InTouch PCS Inc., said the stay created a climate of treacherous uncertainty. “But it gave us extra time to solidify discussions with vendors and alliances with other DEs,” Nguyen said. “We’re happy now because the uncertainty has been resolved, which will help us receive a full commitment from our investors.”
Go Communications Corp. would like to see the FCC streamline the DE auction. Go views DE licensing delays as an additional head start for winners of the previous broadband PCS auction, which wrapped up March 13.
“History has taught us that delays in the licensing process are the kiss of death for those who are impeded from bringing their services to marketplace,” said Steven Zecola, Go president and CEO.
“The FCC can and should escalate the rounds of bidding per day and increase the minimum bid increments between rounds. These procedures are routinely used by auctioneers in all fields of commerce to speed up an auction,” Zecola said.
Go also suggests the FCC speed up granting construction authority for new entrants after the auction.
DeFeo, who was a longtime leader at U S West NewVector Group Inc., said he is not fretting the race to market. “I went through that head-start phenomenon in cellular and saw companies enter the market two years later and it didn’t make any difference. Being first isn’t a surrogate for success. It’s more important to do it right than to do it first. In a competitive environment like PCS, execution becomes the driver,” DeFeo said.
Even with the TEC lawsuit out of the way, DEs could stumble into post-auction challenges, said Tim Welch, a Washington, D.C., attorney who represented Communications One Inc., a female-controlled company that petitioned the FCC to withhold licenses from winners of the previous PCS auction until after the DE auction.
“A second place bidder could argue that they would have won first if they’d have had the bidding credits. No matter what the FCC does, this isn’t going away,” Welch said.
However, a ruling by the U.S. Supreme Court on the key affirmative action case of Adarand Constructors, a white-owned Colorado business, is expected before the Aug. 2 auction.
TEC is a Jackson, Miss.-based holding company for six rural telephone companies. TEC was considered ineligible for the DE auction because its annual gross revenues exceed the policy limit of $125 million. TEC has since aligned itself with PCS PrimeCo L.P., which won several markets in the previous broadband PCS auction.
The rules outlining DE preferences were created by the FCC, based on a 1993 order from Congress. DEs are women, minorities, small businesses and rural telephone companies. The rules allow women and minorities to make installment payments on licenses won.
