The Federal Communications Commission likely was wise to postpone the auction of advanced wireless services spectrum in a calculated move that could deflect potential lawsuits from disgruntled designated entities. The DEs charge that changes to rules aimed at closing DE loopholes hurt them too much this close to the auction.
Still, a creepy “NextWave-like” chill ran up my back.
The government has been “damned if it does, damned if it doesn’t” regarding any lofty plans aimed at helping small businesses enter the wireless space. Have there been many (any) DE success stories? While looking through old RCRs to find out the answer to that question, I was fascinated by the warnings of impending train wrecks that 20-20 hindsight offers.
(Quick background: Only small businesses could participate in the 1996 C-block auction for 30-megahertz PCS licenses. It was the government’s attempt to bring entrepreneurs and competition into telecom. As such, DEs were eligible for bidding credits and the government actually financed the licenses. But the soft money led to a bidding frenzy and by round 52, prices for C-block spectrum were higher in all markets than during A- and B-Block auctions. In the end, NextWave Telecom Inc. won the majority of C-block licenses and from there the story gets murky and, depending on where you want to lay the blame, it was very ugly.)
Check out what we wrote in the March 27, 1996, issue of RCR: “With the extreme amounts of money being paid for C-block PCS licenses, there is no doubt that many winners will end up in default when payment time arrives.”
Or this one from Taylor Simmons, who analyzed the ’96 auctions in RCR’s April 1, 1996, issue. “This whole thing is a big mess. … I see a lose-lose situation here. The winners will be in debt and the losers will badger the winners with lawsuits.”
So were there some success stories from small businesses entering a spectrum auction? Yes. Omnipoint Corp., for example, won a few licenses including the coveted New York market. The carrier launched service, but later sold it assets to VoiceStream Wireless Corp., which eventually was sold to Deutsche Telekom AG.
Indeed, DE success usually means selling the company. (Which is why the four largest carriers account for 85 percent of subscribers.) One of the provisions contested by three DE companies in the AWS auction is that DEs forfeit their discounts if they sell the licenses within 10 years. (Old rules put the limit at 5 years.)
Does this keep with the spirit of giving incentives to small businesses to help them compete with wireless behemoths? That they’re forced to stay in business for 10 years before selling out, or lose their discount?
