WASHINGTON-Federal Communications Commission Chairman Reed Hundt said the proposed removal of race- and gender-based bidding credits in next month’s entrepreneur block auction for personal communications services licenses is not a retreat on affirmative action, but he would not acknowledge plans for female and minority preferences in the future.
“I have a passionate commitment to the goal of including minorities, women and small businesses in the communications revolution,” said Hundt.
The FCC’s proposal was strongly influenced by prospective bidders’ willingness to forego female and minority bidding preferences to keep the upcoming auction on track, given the “strict scrutiny” standard for federal affirmative action programs in the Supreme Court’s Adarand ruling last month.
In response, the FCC rescheduled the Aug. 2 auction for Aug. 29 and recommended that 25 percent bidding credits be limited to “small businesses” averaging $40 million or less in annual gross revenues. Eligibility for the entrepreneur block auction, which involves the sale of nearly 500 licenses, is limited to firms with less than $125 million in yearly receipts.
Under current rules, women and minorities are eligible for 15 percent bidding credits and an additional 10 percent discount if they qualify as small businesses. The rule changes expected to be adopted by the FCC would base the 25 percent credit on bidders’ economic size.
Despite support for eliminating female and minority bidding credits, the FCC’s handling of the emotionally- and politically-charged affirmative action issue has drawn some criticism.
“I think they went further than the Supreme Court in the Adarand decision went,” said Micheal Walker, president of the National Paging & Personal Communications Association. “Their actions look like a full retreat,” added Walker, whose trade group represents minorities, women and small businesses planning to participate in the PCS auction.
Commissioner Andrew Barrett, a Republican and the sole African American on the five-member FCC, agreed that an extended delay of the entrepreneur block auction would harm bidders but attacked the commission for taking positions “that have reflected a retreat from its willingness” to defend affirmative action programs administered by the FCC.
Barrett pointed to the lack of female or minority bidding credits in proposed auction rules for 900 MHz specialized mobile radio rules. The commissioner also said the FCC considered scrapping race- and gender-based credits when those regulations were challenged in court several months ago. Barrett’s term ended June 30, but President Clinton has not indicated how he intends to fill the slot.
Women, minorities and small businesses, for whom the entrepreneur block auction was designed, fear investors will flee and strategic partnerships will dissolve with a lengthy delay and legal uncertainty. Their sense of urgency to proceed with the auction is driven by the fact that in every market there already are two cellular carriers that have been in operation for a decade and have begun to lower prices in preparation for competition from new PCS companies.
To emphasize the point, the FCC granted 99 PCS licenses to telecommunications giants like AT&T Corp., Sprint Corp. and the Baby Bells on the same day (June 23) that it announced its intention to get rid of female and minority bidding credits in the entrepreneur block auction.
The auction, originally set for this spring, was postponed once already when Telephone Electronics Corp.-a Mississippi rural telephone company-challenged female and minority bidding credits. TEC later dropped its lawsuit after striking a deal with PCS PrimeCo L.P., a partnership of Nynex Corp., Bell Atlantic Corp., U S West Inc. and AirTouch Communications.
PCS PrimeCo, winner of 11 major markets in the broadband PCS auction that ended in March, recently announced it will not partner with any bidders in the entrepreneur block auction for economic and legal reasons.
However, that is not expected to upend PCS PrimeCo’s partitioning agreement with TEC whereby the rural telephone firm will offer wireless telephony service in parts of the New Orleans-Baton Rouge market bought by PCS PrimeCo.
The FCC, responding to Congress’ 1993 mandate to give women, minorities, small businesses and rural telephone companies special attention in wireless auctions, offered with mixed success bidding credits, installment payments and other incentives to these designated entities in the previous sale of nationwide and regional advanced paging licenses.
Those entitlements were intended for DEs in the upcoming entrepreneur block (30 megahertz) auction and in another auction of smaller, 10-megahertz licenses later this year.
The FCC is quick to point out that removing race- and gender-based bidding credits in the entrepreneur block auction would not necessarily set a precedent for future spectrum auctions. The agency also refused to concede that current auction rules are unconstitutional within the parameters of Adarand.
Nevertheless, the issue of whether such bidding credits can or will be employed again is uncertain and may become clearer only after the strict scrutiny standard is tested in the lower courts.
“The state of law as it now exists creates opportunities for all sorts of challenges to the law,” said James Troup, a Washington D.C. lawyer who represented TEC in litigation against the FCC.
The Justice Department has issued affirmative action guidelines in the wake of the Adarand ruling. Federal agencies must determine how race-based programs measure up to Adarand.
The agencies’ findings could be useful to the Clinton administration, which is winding up a comprehensive review of all federal affirmation action programs.
“I have always believed that affirmation action is needed to remedy discrimination and to create a more inclusive society that truly provides equal opportunity,” said President Clinton. “But I have also said that affirmative action must be carefully justified and must be done the right way.”
As such, affirmative action could become a pivotal issue in the 1996 presidential election.
Senate Majority Leader Robert Dole, R-Kan., is expected soon to introduce legislation that would eliminate federal affirmative action programs.
Rep. Charles Canady, R-Fla., chairman of the House Judiciary Committee on the Constitution, plans to sponsor a similar bill.
But the GOP House leadership has decided against trying to pass affirmative action reform legislation this year in the hope of putting a comprehensive piece of legislation forward next year that would ban set-asides, quotas and preferences and reportedly replace them with programs that empower African Americans. House Republican leaders believe they have a chance to make respectable gains with black voters in 1996.
Kweisi Mfume, D-Md., former chairman of the Congressional Black Caucus, recently said Clinton risks losing the black vote if he doesn’t stand his ground on affirmation action and threatened economic boycotts in states occupied by Republican politicians at the forefront of the assault on affirmative action.
