WASHINGTON-The Federal Communications Commission and Omnipoint Corp. appeared to be close to negotiating a deal late last week on how to prevent big companies from taking illegal control of bidders who win personal communications services licenses at the upcoming entrepreneur block auction.
The auction is set for Aug. 29, but that date could slip a week or so as a result of recent litigation. If snags in talks are not resolved, the delay could be much worse.
There was pressure to break the impasse by Friday when FCC General Counsel William Kennard and other high-ranking agency officials broke for August vacations.
FCC Chairman Reed Hundt, who pledged to “pursue every possible avenue to get this auction back on track,” was vacationing in Colorado last week and will be back next week.
“I’m trying to prevent this from becoming a big-company front band without harming any of the existing deals,” said Douglas Smith, president of Omnipoint.
Sources said the FCC did not want to re-open a rulemaking or initiate a new one, and attempted to reassure Omnipoint it would closely scrutinize applications for shams. In fact, there was talk of the FCC retaining an outside auditor to bolster that effort.
An FCC official said current rules safeguard against shams, adding that 49.9 percent investors having marketing, trademark, branding and roaming agreements with PCS applicants are likely to attract attention.
Smith met with Kennard last Wednesday, following a larger meeting earlier that day, not attended by Smith, which included FCC officials, industry representatives and Omnipoint lawyers.
A federal court on July 27 blocked the entrepreneur block auction from going forward after Omnipoint objected to new ownership rules that let single investors hold up to 49.9 percent in any applicant.
The FCC subsequently postponed the July 28 short-form application filing deadline.
Radiofone Inc., a cellular operator in New Orleans, last week challenged revised auction rules and asked the U.S. Court of Appeals for the District of Columbia Circuit to consolidate its appeal with the Omnipoint case. Another party is said to have filed an appeal as well.
Radiofone also is fighting PCS-cellular cross ownership rules in the U.S. Court of Appeals for the Sixth Circuit in Cincinnati.
The FCC changed ownership guidelines and dropped bidding credits for women and minorities for the PCS entrepreneur block auction last month in response to the recent Supreme Court ruling curtailing federal affirmative action programs.
Senate Minority Leader Robert Dole, R-Kan., and Rep. Charles Canady, R-Fla., chairman of the House Judiciary subcommittee on the Constitution, last month introduced bills to end race and gender-based preferences.
Originally, the 49.9 percent ownership structure was available only to women and minorities. All other bidders were limited to 25 percent investors.
The entrepreneur auction was designed for women, minorities and small businesses. Eligibility is restricted to firms with $125 million or less in gross annual revenues. All companies with $40 million or less in yearly earnings qualify for a 25 percent bidding discount.
In March, the U.S. Court of Appeals for the District of Columbia Circuit stayed the auction on related grounds. The lawsuit brought by a rural Mississippi telephone company was settled out of court.
Omnipoint, based in Colorado Springs, Colo., received a pioneer’s preference license from the FCC to build a digital pocket telephone system in New York. Some parties, including the FCC, have suggested Omnipoint is using the legal system to delay competition in that market.
Go Communications Corp. said it was considering legal action against Omnipoint and planned to solicit help from Congress if litigation dragged on.
