WASHINGTON-With the advanced wireless services auction quickly approaching and companies largely silent about their bidding intentions, controversy and uncertainty are slowly beginning to dominate an event billed as one of the biggest and most import sales of public airwaves in years.
Already a health-related lawsuit designed to block the June 29 start of the AWS auction has been filed in the U.S. 2nd Circuit Court of Appeals in New York. The court last week said it could take initial action by June 6 on Maria Gonzalez’s petition to force the Federal Communications Commission to conduct an environmental impact statement before the agency’s planned sale of 1,122 wireless licenses in the 1710-1755 MHz and 2110-2155 MHz bands.
Another lawsuit could be on the way.
Representatives from Council Tree Communications Inc., Minority Media and Telecommunications Council and Bethel Native Corp. met with FCC officials last week as a follow-up to their May 5 motion for expedited stay of Auction 66 pending agency reconsideration or judicial review of new designated-entity guidelines. The groups argue changes to DE rules approved April 25 were not anticipated and will hurt DEs’ ability to secure financing for the auction without limiting the ability of large cellular carriers to partner with small-business applicants.
CTIA, the national cellular carrier association, urged the FCC to reject the petition.
And then, out of nowhere, a watchdog group last week filed complaints with the FCC, the Securities and Exchange Commission and congressional committees alleging large mobile-phone carriers and their small-business partners illegally pocketed billions of dollars of taxpayer money through deceptive auction practices.
Teletruth, a nationwide, independent customer alliance and a former member of the FCC Consumer Advisory Committee, said lax FCC and Justice enforcement of auction rules puts the upcoming AWS auction in jeopardy.
“Teletruth believes that the DE status of the large phone companies saved them approximately $8 billion when comparing the discounted prices versus the retail prices they would have paid had they not received the discounts. Obviously, an investigation is needed to determine the exact amount,” the group said. “Our request for legal action is aimed at ending this refusal to enforce the law. America has been robbed. Its treasury has been robbed of billions of dollars, and its market has been robbed of competition.”
The Teletruth complaint, which includes allegations similar to those included in a lawsuit filed against Wall Street investor Mario Gabelli, could further muddy waters in advance of the AWS auction.
In a new report, The Shosteck Group warns delays in developing technology for AWS bands could lead to negative value for certain successful bidders. “Some auction winners-especially new entrants to the mobile industry-could experience more extensive losses by deployment on the spectrum than by abandoning it once they begin to realize the challenges of deploying,” said Herschel Shosteck, president and chairman of the company.
Meantime, some details have emerged on which firms could be headed for the auction.
Sprint Nextel Corp., the No. 3 mobile-phone carrier, and its cable TV partners signaled they are interested in acquiring more spectrum. Leap Wireless International Inc. left no doubt; it is serious about spending serious money at the AWS auction. Alltel Corp., a major regional carrier, said it would be a no-show. Most everywhere else in the wireless industry, silence.
“We are … evaluating whether it would be a good idea to have a more direct interest in wireless spectrum. Accordingly, we, together with our partners in the Sprint-Nextel joint venture, are planning to file a short-form application at the FCC to participate in an auction of advanced wireless service spectrum, which will start on June 29,” Time Warner Cable stated. “The filing of this application does not obligate Time Warner Cable or other companies to bid in the auction, but it provides us the flexibility to take part should we decide it makes business sense to do so.”
The AWS short-form application filing deadline was May 10. A stronger indicator of the ultimate field of AWS applicants will come June 1 when upfront payments for Auction 66 are due.
Last November, Sprint Nextel and four cable companies-Time Warner, Comcast Corp., Cox Communications and Advance/Newhouse Communications-announced plans to sell wireless service as part of the cable companies’ bundles. Sprint Nextel and its affiliates serve more than 45 million customers, while the four cable TV companies combined provide service to more than 41 million subscribers.
Cable TV operators, for their part, are anxious to add wireless service to their bundled offerings to remain competitive with large Bell telephone companies. Wireline giants, which want to add video to their package of high-speed Internet, telephone and wireless services, dominate the U.S. mobile-phone market.
Time Warner and Sprint Nextel said they are pleased with the partnership so far and plan to conduct early market tests later this year.
“If Sprint does not register, too, then it is possible it and its cable friends can maintain active discussions during the AWS auction that could lead to further investment in the joint venture with cable inclusive of [Sprint Nextel’s] huge greenfield 2.5 GHz spectrum position,” said Jim Wiesenberg, a wireless licensee and principal of WW Associates, a spectrum advisory firm.
It turns out Sprint Nextel has decided against bidding on its own at AWS auction. “Sprint Nextel is not filing an individual short form to participate in the AWS auction,” said Leigh Horner, a Sprint Nextel spokeswoman.
At a conference in Palm Springs last week, an Alltel executive said the Little Rock, Ark.-based carrier is not interested in summer bidding. “We’re going to take a pass on that,” said Kevin Beebe, Alltel group president for operations at a meeting of the Rural Cellular Association. Beebe said that Alltel “didn’t like the split nature” of the 1.7/2.1 GHz paired spectrum bands that will be on the block, and that the company believed that there would be cost challenges associated with building a greenfield network with that spectrum. He went on to say that the way the FCC is poised to sell the spectrum-through blind bidding-also wasn’t to Alltel’s liking.
The Congressional Budge Office estimates the AWS and some smaller auctions could raise $15 billion for the U.S. Treasury. It is unclear whether recent rule changes on blind bidding and small-business bidding discount eligibility-as well as litigation-could lower CBO’s revenue projection.
“We have not been advocates of blind-bidding rules,” Beebe said. He gave the example that if Alltel was considering buying more spectrum to bolster its operations in Arizona, the company would want to know if other CDMA operators were buying significant amounts of spectrum in nearby markets, such as San Diego, where Arizona customers would commonly roam. However, one industry source speculated Alltel’s decision may have less to do with spectrum and blind bidding than possibly with the company’s merger-and-acquisition agenda.
Another regional CDMA carrier, San Diego-based Leap, is bullish about the upcoming AWS auction, either directly or with partners. In connection with its auction plans, Leap last week proposed plans for a forward sale of $250 million of its common stock through an underwritten offering, a portion of which it plans to use to acquire spectrum licenses.
RCR Wireless News reporter Kelly Hill contributed to this report.
