WASHINGTON-Three rural senators on Thursday told the Federal Communications Commission that its rules for the 700 MHz C- and D-block auction currently set for Aug. 27 did not follow the will of Congress when it passed legislation last month to postpone the auction of the majority of the 700 MHz band while allowing the auction of rural licenses to go forward.
“We did not intend for the FCC to suddenly allow bidders to augment their upfront payments. Had we intended to upset the financial positions of the bidders and shift the ability of certain entities to fully participate, we would have included the payment increase in the legislation. Instead, we specifically required the FCC to return certain upfront payments submitted for the portion of the spectrum no longer being auctioned on Aug. 27,” said Sens. Tim Johnson (D-S.D.), Max Baucus (D-Mont.) and Mike Enzi (R-Wyo.).
The dispute arose because Congress stated in its Auction Reform Act that only those participants deemed eligible to participate in the original 700 MHz auction set for June 19 could participate. The FCC was directed to return the upfront payments of those bidders wishing to bid on the A- B- and E-blocks but it wasn’t that simple.
The FCC allows bidders to either designate specific licenses or check “all” when applying to participate in an auction. If a bidder checks “all” then the bidder must make an upfront payment sufficient to bid on all of the licenses.
How was the FCC to decide which licenses an “all” participant wanted to bid on now that the inventory in the auction had been significantly reduced?
The FCC decided to allow bidders to either withdraw from the auction altogether and get their money back or to apply their money to the new inventory. Bidders who had designated only C- and D-block licenses were allowed to make additional upfront payments if they wished to now check the “all” box.
This allowed people “the flexibility to level up and to make adjustments. . Everybody gets equal flexibility,” said an FCC official.
Not good enough, says the National Telecommunications Cooperative Association, which released the senators’ letter.
With the FCC’s approach bidders are allowed to shift their strategy and that is not what Congress intended, said Tom Wacker, NTCA director of government affairs.
“Effectively the cards are on the table, entities have a good idea what everybody wants and now they are allowed to shift their strategy,” said Wacker.
NTCA is specifically concerned with those few bidders who instead of choosing “all” chose A-, B- and E-block licenses and are now allowed to join in the auction for the C- and D-block. The FCC interprets the bill as allowing all eligible bidders in the original auction to participate in the new auction even though some bidders may have only been interested in the inventory that is now not available.
The FCC tried to counter-balance that by allowing bidders in the C- and D-blocks to now check all, said the FCC official, but Wacker said this was equally unfair and wrong.
The senators-and NTCA-are not the first to highlight this issue. The FCC is currently considering a reconsideration petition that addresses some of these same issues. The FCC is expected to rule shortly-perhaps even before July 26 when all of the 700 MHz auction bidders must finalize their decisions.
