WASHINGTON-The Federal Communications Commission plans to seek legislation to privatize spectrum auctions, a move that would shift debt collection to a third party with banking expertise.
While the FCC would continue to be responsible for crafting and enforcing auction rules as well as administering bidding itself, the job of collecting monies owed by winners would fall to a third party.
Such an arrangement could give auction winners-especially smaller businesses-more flexibility in negotiating financial terms required by auction rules. Already, a number of companies have defaulted on auction payments for missing deadlines, sending confusing signals to industry and Wall Street and making the FCC a reluctant fall guy.
“These new businesses should have the ability to negotiate with bankers just as companies do every day,” said FCC Chairman Reed Hundt. “But the FCC is ill-suited to act as a banker.”
Indeed, the commission has felt pressure from industry and Capitol Hill to be less draconian in enforcing auction payment deadlines.
By and large, most auction winners-from stalwarts like AT&T Corp., Sprint Corp. and the Baby Bells, to startups-have met financial auction obligations.
On a related front, the agency is due soon to release a policy statement that strongly endorses continued technical, service and spectrum flexibility.
Though described by Hundt in a speech last week as “a ground breaking statement of policy … that I would hope would become a statement that sweeps the world,” the 30-page paper is not apt to break new ground.
Rather, the document’s impact will likely come from being a comprehensive articulation of an FCC spectrum policy that has driven wireless rulemakings in recent years. It will give direction to that policy and underscore core underlying principles that guide the transition from facilities-based licensing to geographic auction licensing in the digital age, according to officials.
The policy statement will also address global implications of spectrum policy.
“We have to even more warmly embrace markets,” Hundt said.
The move to a liberalized spectrum policy, while generally supported, is still vulnerable to criticism.
Private wireless users not in the communications business argue auctions are ill-suited for them. However, they appear to be warming to the idea of spectrum lease fees. The challenge is selling spectrum fees to Congress when it decides to expand auction authority in budget legislation next year.
Commercial wireless carriers are wary of increased spectrum flexibility because of the uncertainty it poses for equipment manufacturers. Such a scheme could mean more competition for them.
Free marketeers, like George Gilder and Peter Huber, believe the entire spectrum allocation/assignment scheme should be scrapped and replaced with a regime ruled by spread spectrum digital technology. To do so would kill the FCC’s auction program, which has raised $20 billion to date.
Hundt’s remarks on spectrum auction privatization and spectrum reform policy at a conference here last Thursday followed incoming House telecommunications subcommittee Chairman Billy Tauzin’s (R-La.) promise to study options for overhauling the FCC. Tauzin said he was reluctant to reopen the 1996 telecom act, which is now the subject of litigation.
Hundt defended the agency’s deregulatory, pro-competitive policies and said he wanted to pursue legislation to increase flexibility for unlicensed spectrum; to streamline experimental authorization for spectrum use; and to remove barriers to using smart antennas.
