WASHINGTON-The C-block auction isn’t a cheap date.
Bids topped more than $1 billion in early rounds of an auction taking place largely because a previous winner was unable to pay the steep amounts it pledged.
The Federal Communications Commission began auctioning 422 personal communications services licenses last week despite ongoing litigation with NextWave Telecom Inc. and a new lawsuit that claims the FCC was not diligent in weeding out illegal arrangements between large carriers and bidders with small-business status.
At the end of round seven, total bidding had topped $1 billion. Verizon Wireless entity Cellco Partnership made the most high bids in round seven, with 89 bids totaling nearly $381.2 million and covering almost 101.3 million pops.
In the race for the valuable New York license, Northcoast Communications L.L.C. bid nearly $206 million for two of the three licenses.
Last January, the government reclaimed 90 licenses from bankrupt NextWave Telecom Inc. The agency later split the 30-megahertz (C-block) licenses into 10-megahertz chunks and allowed large carriers to bid on a portion of the licenses originally reserved for small businesses. The auction also includes licenses reclaimed from other bankrupt entities and licenses unsold in previous auctions.
As late as last week, NextWave was still bitterly complaining about the re-auction. NextWave also filed its initial brief in an appeal of the FCC’s actions before the U.S. Court of Appeals for the District of Columbia Circuit. Oral argument in that case is set for March. 15.
The FCC General Counsel, Christopher J. Wright, made reference to the on-going NextWave litigation in a speech on Thursday at the annual Institute on Telecommunications Policy & Regulation presented by the Practicing Law Institute.
“At this point, we are sixth/seventh of the way there. [But] it will be a number of months presumably before we get a final answer,” said Wright.
NextWave wasn’t the only player litigating the re-auction.
USA Today reported that Allegheny Communications Inc. asked a D.C. court to suspend the auction, but the court denied the request. Allegheny noted in its filing that Cingular Wireless owns an 85-percent stake in Salmon PCS L.L.C. Cingular withdrew its application to participate in the auction, but Salmon has been an active bidder, offering 190 bids in round seven. Of those 190 bids, 48 (totaling more than $72.4 million) were the high bids.
At the end of round seven, Allegheny had made three high bids for more than $10 million, covering the San Antonio and Brownsville, Texas, markets.
Nextel Communications Inc., which as of the end of round seven had made nine bids but none of them the high bid, commented on the Allegheny suit during a PLI panel on wireless issues.
Such arrangements, said Robert S. Foosaner, Nextel senior vice president and chief regulatory officer, will be “the determinant factor of how successful the [small business] program is. We will know that when the auction is over,” said Foosaner.
VoiceStream Wireless Corp. also has an investment relationship with Cook Inlet/VS GSM V PCS L.L.C. At the end of round seven, Cook Inlet had made 24 high bids for markets such as Louisville, Ky., and McAllen, Texas.
By itself, VoiceStream had made five high bids for markets such as Houston and Los Angeles at the end of round 7.
The FCC had ruled VoiceStream was qualified to participate in the re-auction over the objections of Sen. Ernest Hollings (D-S.C.).
“Being a `qualified bidder’ is not the same as being qualified to hold a license. If VoiceStream successfully becomes a winning bidder for a license in [the auction], the commission will, as part of its long-form application review, carefully examine its ownership, as it does all such applications, to reach a finding of whether it is in compliance with our rules,” said FCC Chairman William E. Kennard in a letter to Hollings.
Hollings raised questions late last month about VoiceStream Wireless’ eligibility to bid in the auction, citing possible foreign-government-ownership problems. Hollings said a $5 billion cash transfer from Deutsche Telekom AG to VoiceStream may run afoul of foreign-ownership rules that bar firms more than 25-percent owned by a foreign government from holding FCC licenses. The FCC has the discretion to waive the 25-percent rule.
In other C-block news, the FCC last week approved the purchase by Eliska Wireless Ventures I Inc. of eight C-block licenses from DiGiPH PSC Inc.
Sonera Corp., a company owned significantly by the government of Finland, has a large investment in Eliska.
The FCC’s Wireless Telecommunications and International Bureaus were apparently ready to grant the license transfers when the Department of Justice stepped in at the last moment citing national-security concerns. The parties, and the Justice Department and the FBI, then asked the FCC to hold off on granting the license-transfers until Eliska/Sonera and DOJ/FBI could reach an agreement. That agreement, which allows for law-enforcement access to Eliska’s networks in cases where national-security issues or public-safety issues are involved, was filed with the FCC earlier this month.
The commission noted in its approval that the concessions in the Eliska/Sonera deal, if applied broadly, would require a complete rule-making process. Some of those concessions include access to Eliska’s network in ways that the D.C. Circuit said in August may go beyond the scope of the digital wiretap act.
