An Indiana-based company bidding in the ongoing C-block auction of broadband spectrum asked the Federal Communications Commission to waive rules that prevent it from speaking to investors in entities that have dropped out of the auction.
At press time, the FCC had not responded yet to the request. Communications Venture PCS L.P. is comprised of small telephone companies in Indiana and Michigan. The venture is bidding on basic trading areas in those states. The auction is in its third month.
FCC rules don’t allow bidders to communicate with each other during the auction to avoid collusion on bids or strategies. Last month, bids began to balloon beyond expectation and several significant players pulled out of the process, including U.S. AirWaves Holdings Inc. U.S. AirWaves had the financial backing of stout Korean company Hyundai Electronics America; MCI Communications Corp. reportedly made a $25 million loan to the bidding entity last December.
CVC would like a chance to entice the interest of investors in now-inactive bidders. There is little risk of collusion between parties if one is no longer an active participant, and therefore exerts no influence over the outcome of the auction, said CVC President Mark Grady in a letter to William Caton, acting FCC secretary.
“If the applicant could, subsequent to the loss of individual bidding eligibility, take a non-controlling interest in an active application, the combined financial resources of the active and inactive applicants could strengthen the financial ability of the active applicant to maintain a competitive position in the auction,” Grady said.
Enforcement of the rule, when one party is no longer even eligible to participate, can frustrate the FCC’s attempt to hold a dynamic auction, Grady said.
CVC told the FCC it is participating in the C-block auction because the FCC indicated the auction would be designed for small businesses.
“Like other small businesses, CVC relied on this process and did not participate in the A- and B-block auctions, but instead left those auctions up to the `deep pockets,’*” Grady said.
The C-block auction, which is offering licenses for both major and basic trading areas, has so far generated bids that collectively amount to about $8 billion. That’s more than the total sale of A- and B-block licenses, which yielded $7.7 billion.
