WASHINGTON-How did a well-intentioned government program to create business opportunities for women, minorities, small businesses and rural telephone companies in the most explosive sector of the telecommunications industry-wireless-become such a mess?
A good question, in view of the second postponement of the entrepreneur block auction of 493 personal communications services licenses and the many lawsuits the Federal Communications Commission has attracted by implementing a 1993 congressional law requiring the agency to give so-called “designated entities” preferential treatment in the sale of wireless telecommunications licenses.
The menu of options Congress-then controlled by the Democratic Party-provided to promote ownership diversity included bidding credits, installment payments and tax certificates. After early disappointments and further tweaking, the FCC program began to bear fruit.
Although female- and minority-owned firms failed last summer to win any of the 10 national licenses for narrowband PCS, they won 11 of 30 regional narrowband PCS licenses.
But it’s been all downhill from there.
One lawsuit after another. One delay after another. Now, the bidders are getting bitter, and it won’t be long before entrepreneurs and investors give up on what they may come to view as the DEad auction.
What happened?
Did the FCC overreact by dropping bidding credits and relaxing ownership and affiliation rules for the entrepreneur block auction shortly after the Supreme Court ruled in June that federal affirmative action programs must meet stricter standards?
The FCC was under great pressure from women, minorities and small businesses to move ahead with the entrepreneur block auction. In a June 16 memo to FCC Chairman Reed Hundt and the other four commissioners, FCC General Counsel William Kennard, Wireless Telecommunications Bureau Chief Regina Keeney and then-Director of Communications Business Opportunities Anthony Williams said their recommendation to eliminate race and gender bidding credits was “guided by the imperative that the action take place as quickly as possible in order to minimize the disruption to prospective bidders.”
The FCC, thus, felt reasonably safe taking such action.
But in doing so, did the FCC simply create huge loopholes for big business to dominate an auction intended for entrepreneurs and small businesses?
Would the FCC have been better off litigating the lawsuit filed in February by Telephone Electronic’s Corp., a rural Mississippi telephone company that claimed auction rules favored women and minorities?
Has the U.S. Court of Appeals for the District of Columbia Circuit been too permissive in granting one stay after another? Or, was the FCC simply in a no-win situation?
In that light, maybe the entrepreneur block auction fiasco should not be viewed in a vacuum. A better question might be: How did telecommunications policy become a lightning rod for the affirmative action debate?
A confluence of factors seem to offer some explanation: changing times, historical coincidence and the 1996 presidential election.
The 104th Congress that opened 1995 was not the one that wrote the auction legislation two years ago.
Republicans, emboldened by gains in the 1994 midterm election that allowed them to take the House and Senate away from Democrats, came to Washington in January hell bent on reform. Though affirmative action was not on the political radar screen in early 1995 it soon became a political powderkeg.
Congress, after learning that multimedia giant Viacom Inc. was due to receive a tax deferral up to $2.3 billion from the sale of cable TV properties to a minority-controlled venture, killed the FCC’s minority tax certificate program in April. President Clinton reluctantly signed the bill because it was tied to a self-employment health insurance measure.
The highly publicized action was not only a blow to women and minorities interested in new paging and pocket telephone opportunities, but it proved a catalyst in the affirmative action issue for Republicans. So did the conservative-led Supreme Court’s announcement that it would take up a federal affirmative action challenge in Adarand Constructors Inc. v. Pena.
GOP presidential candidates including Senate Majority Leader Robert Dole of Kansas, Sen. Phil Gramm of Texas and California Governor Pete Wilson took the cue and made affirmative action a presidential campaign issue by attacking it.
Dole and Rep. Charles Canady, R-Fla., chairman of the House Judiciary subcommittee on the Constitution, recently introduced bills to eliminate race- and gender-based preferences in federal programs.
Clinton agreed that reforms are in order but otherwise defended the policy as necessary to remedy past discrimination against African Americans. “Amend it, don’t end it,” said Clinton.
To which Pete Wilson replied, “End it. You can’t mend it.”
Meanwhile, nothing is happening fast at the FCC, which planned to complete broadband PCS auctions this year.
Where does that leave the elusive entrepreneur block auction?
