WASHINGTON-Three groups this week could file a lawsuit in federal appeals court to stay the June 29 start of the advanced wireless services auction if the Federal Communications Commission does not agree by today to drop changes it recently made to the small-business bidding program.
On Friday, Council Tree Communications, the Minority Media and Telecommunications Council and Bethel Native Corp. petitioned the FCC for expedited reconsideration of revisions to small business-or designated entity-rules. The rules are designed to prevent companies otherwise ineligible for bidding credits and other benefits accorded DEs from circumventing those rules. They asked regulators not to enforce the new rules until objections to them are considered by the FCC or a federal appeals court.
The FCC approved the DE rule changes on April 25, about two weeks before this Wednesday’s AWS short-form application filing deadline. Prospective license bidders for the 1,122 licenses in the 1710-1755 MHz and 2110-2155 MHz bands must make upfront payments by June 1.
Democratic FCC Commissioners Jonathan Adelstein and Michael Copps have been critical of the GOP-led FCC for not pursing reforms to the DE program sooner. They raised the issue last summer, but it was not until February that a proposal was issued.
The backdrop to the DE debate has been a high-profile lawsuit against Wall Street telecom investor Mario Gabelli, who is accused of defrauding the federal government of at least $85 million by hiding his firm’s control of winning DE partnerships he helped craft in past auctions.
Council Tree, MMTC and Bethel Native said none of the new DE rules approved by the FCC is limited to partnerships involving large, in-region wireless carriers as contemplated in the agency’s original proposal. Rather, the three groups said new rules apply directly to DEs, which are eligible for bidding discounts of up to 25 percent.
“Adoption of such broadly applicable new rules merely two weeks before the short-form application deadline for Auction 66 is incurably disruptive to the business plans of designated entities, their investors and their strategic partners,” the three parties stated. They added that new DE rules violate a 1993 law designed to foster diversity in wireless telecom licensing.
Council Tree said it has returned approximately $1 billion to investors, which include over 44,000 Native Americans. Bethel Native is a Native American company.
In its ruling late last month, the FCC declined to impose a revenue-based threshold for partnership eligibility in favor of a resale standard to determine whether national mobile carriers and other large telecom firms can join forces with startups and entrepreneurs to pursue discounted wireless licenses at the AWS auction and future auctions.
The FCC said a wireless carrier that leases more than 50 percent of its spectrum capacity cannot gain DE benefits through alliances with DE applicants. Telecom regulators also said they plan to scrutinize any DE partnership that includes a wireless carrier that leases more than 25 percent of its capacity in order to determine eligibility for small business bidding credits and benefits
The FCC reportedly shifted its focus away from a plan to ban national mobile-phone carriers and other large telecom firms from partnering with DEs because FCC members could not agree on where they should draw the line on who could join forces with small business and entrepreneurial auction applicants. Telecom regulators instead wrote new rules unanticipated by small businesses, minorities, investors and others-and left them very little time to react.
Copps predicted new DE rules will be effective without undermining the DE program itself.
But that is not how others see it. Small and mid-sized players said new rules governing unjust enrichment, DE partnerships based on spectrum leasing, and grandfathered DEs will harm existing DEs, chill financing and weaken-if not ruin-the DE program. Moreover, the prospect for litigation could lead to lawsuits before, during and after the AWS auction.
