The Federal Communications Commission fined U S West Communications Inc. and a Western Wireless Corp. subsidiary $1.2 million each for discussing bidding strategy during the D-, E- and F-block personal communications services auction and failing to report the incident in a timely manner. The commission also concluded the two benefited from communicating and unfairly disadvantaged other bidders in the auction.
U S West disclosed in July to the commission that the head of its auction team left a voice mail with a senior vice president at Western Wireless during the auction shortly after placing a bid for the Olympia, Wash., market, stating that U S West had mistakenly placed one of its bids. U S West and Western Wireless, bidding as Western PCS BTA 1 Corp., denied any conspiracy and said the incident was isolated and had no impact on the outcome of the auction.
U S West spokesman Jerry Brown said the carrier has not yet decided whether to appeal the ruling.
“We strongly support the auction process, and we have zero tolerance for the departure of those rules,” said Brown. “Given the fact that the employee was acting on his own and was dismissed immediately, and the incident was self-reported, the fine seems like an overreaction.”
Western Wireless issued a statement saying it fully complied with the auction rules and plans to file its opposition to the ruling.
The bulk of the companies’ fine resulted from their failure to report the incident in a timely manner. FCC auction rules require auction participants to maintain the accuracy of information, which includes joint bidding agreements furnished to the FCC prior to the auction.
While the FCC said a violation of its anti-collusion rule only requires communication of the prohibited information, such as bidding strategy, it went further to say that it believes “the action of U S West and Western are particularly egregious because they evidence a specific intent to violate the anti-collusion rule.”
The commission said the voice message disclosed to Western Wireless that U S West was not interested in the Olympia market even though it was bidding for that market. The communication, said the FCC, appeared to influence both companies’ bidding strategies because once the U S West executive left the message, Western Wireless stopped bidding for the Olympia market. “At the same time, U S West, which by its own account was not interested in the Olympia, Wash., market, nonetheless continued to bid actively for the license and engaged in a `bidding war’ with a third bidder (Whidbey Island Telephone Co.) over the market. However, after Western re-entered the bidding and became the high bidder in round 56, U S West stopped bidding for the license. Thereafter, a `bidding war’ ensued between Western and Whidbey, after which Western ultimately won the E-block Olympia, Wash., BTA license,” wrote the FCC.
Both companies likely benefited from the communication because it reduced the possibility that Western Wireless would compete in markets of interest to U S West, said the commission. Western Wireless, in return, learned more about the overall demand for that market.
“It is apparent U S West and Western’s conduct unfairly disadvantaged the other bidders in the market by creating an impermissible asymmetry of information,” wrote the commission.
U S West’s discovery in July was prompted by a federal probe that began last April. The Justice Department’s Antitrust Division has been investigating possible instances of bid rigging and market allocation that may have occurred during the PCS auctions. It requested information from U S West, Western Wireless and other companies.
U S West dismissed Corey Ford, U S West Wireless’ former vice president of development and external affairs, in July over the incident. He had a personal and professional relationship with Cregg Baumbaugh, Western Wireless’ senior vice president of corporate strategy. Western Wireless did not dismiss Baumbaugh.
