WASHINGTON—The Federal Communications Commission abruptly delayed the advanced wireless services auction until Aug. 9, saying applicants needed more time to prepare for the government’s sale of 1,122 wireless licenses.
The FCC was to have begun the AWS auction June 29, but intense controversy over revisions to small-business, or designated-entity, rules forced the agency to change course. But the FCC’s action, which establishes a new AWS short-form application filing window from June 5 through June 19, is unlikely to prevent the agency from being hauled into court and the AWS auction from further disruption and uncertainty.
The FCC made no mention of a petition for expedited reconsideration of DE rule changes filed by Council Tree Communications, the Minority Media and Telecommunications Council and Bethel Native Corp. and their threat of a lawsuit. The prospect is still real.
The three groups were angered by the FCC’s extension from five to 10-year restrictions on the sale of DE licenses and DE partnership eligibility restrictions based on lease or resale limits. They are poised to file a lawsuit against the FCC as early as this week to stay the auction and force the commission to reconsider either modifying new DE rules or scrapping them altogether. There still could be DE rule modifications, according to a knowledgeable source.
Lobbying on the DE bidding rules has occupied key policy-makers and lawyers at the FCC and on Capitol Hill in the weeks following the commission’s attempt in last month’s decision to prevent large corporations from skirting regulations and acting as fronts for startups and entrepreneurs in spectrum auctions. Critics assert DE rule changes make it far more difficult to secure financing for DEs, and effectively kill a program that awards small business with bidding discounts and other benefits at FCC auctions.
Council Tree, MMTC and Bethel Native previously put the FCC on notice they would sue the agency to block the start of the AWS auction if federal regulators did not rescind major portions of the April 25 DE decision. Representatives from the three organizations have met with FCC officials and congressional staff the past two weeks to argue that the agency is on shaky legal ground and would be best served by discarding the new DE rules, as opposed to having a federal court order it to do so.
The FCC apparently sized up the situation and determined the agency was perhaps most legally vulnerable on making major changes to DE rules so close to the May 10 AWS short-form application filing deadline, not on the rule modifications themselves.
The mobile-phone industry, particularly spectrum-challenged T-Mobile USA Inc., urged the FCC to reject the groups’ petition for expedited reconsideration of the DE ruling.
The commission, still smarting from an agonizingly embarrassing auction lawsuit it lost to NextWave Telecom Inc. in 2003, still has to face the potentially ugly scenario that could arise from a lawsuit in advance of a monstrous auction of 1,122 licenses—one expected to generate as much as $15 billion for the U.S. Treasury.
The risk is perhaps greatest for FCC Chairman Kevin Martin, who was prodded to reform DE rules by Democratic members Jonathan Adelstein and Michael Copps, and then was criticized for waiting too long to move on DE reform.
If the AWS auction becomes embroiled in litigation, it could become an albatross around the neck of Martin and complicate his ability to move his overall agenda forward. Martin, while having had his fair share of challenges—including the communications response to Hurricanes Katrina and Rita—since becoming chairman in March 2005, has not faced controversy with the kind of far-reaching legal and economic implications posed by potential AWS litigation.
The FCC’s DE predicament is made all the more acute and complicated because of the crucial time element. AWS short-form applications were due earlier this month. Some companies, including the Sprint Nextel Corp.-cable TV partnership and Leap Wireless International Inc., publicized their interest in bidding for AWS licenses. Alltel Corp. a regional wireless carrier, decided otherwise. The deadline for AWS upfront payments was June 1. Now that deadline is July 17.
Adelstein voiced displeasure over the AWS auction delay.
“I am disappointed that we are in this position because I made every effort to conclude the DE proceeding well in advance of our June 29, 2006, auction date, a date to which I had steadfastly been committed,” said Adelstein in a concurring statement. “I had tried to move this proceeding forward since August of last year when the commission first committed to consider a change to the rules to restrict the ability of DEs who have a material relationship with the nation’s largest wireless carriers from having access to bidding credits in future auctions. We could have and should have been done with the DE proceeding months ago. In previous statements, I even expressed my concern with the effect of the delay on both interested parties and our own commission staff in trying to conclude an unnecessarily expansive review of the DE program sufficiently in advance of the June 29 AWS auction date. But as I have said before, this timing has not been of my choosing.”
