WASHINGTON-The Federal Communications Commission ruled late Friday to limit controversial small-business bidding changes to the advanced wireless services auction and future license sales, mollifying critics of retroactive provisions while emboldening other opponents to seek relief in court.
The FCC’s retreat in April from a proposal to ban major mobile-phone carriers and possibly other large telecom firms from partnering with small business, or designated entity, applicants and adoption of unexpected anti-fraud restrictions has attracted mounting criticism in recent weeks from small companies, rural wireless firms, Alaska native groups, minority telecom representatives and venture capitalists.
Because the FCC only made relatively minor revisions-though significant to DEs of previous auctions now contemplating license sales-the debate is likely to shift from the commission to a federal appeals court.
Numerous parties oppose extending restrictions on DE license sales from five to 10 years and a rule denying bidding credits and other benefits to DEs that agree to lease and/or resell or wholesale more than 50 percent of their spectrum. Among those in that camp are Council Tree Communications Inc., Minority Media and Telecommunications Council and Bethel Native Corp. The group could sue the FCC to delay the start of the AWS auction-already pushed back from June 29 to Aug. 9-to contest DE rule changes they claim are legally unsound and were made so late in the process that they undermined business and funding arrangements in advance of the largest spectrum auction to date.
The FCC plans to sell 1,122 licenses in the 1710-1755 MHz and 2110-2155 MHz band. The auction could net the U.S. Treasury between $10 billion and $15 billion.
In a separate statement, FCC Chairman Kevin seemed defensive in the latest chapter of the DE skirmish, which began in earnest last August when Democratic Commissioners Jonathan Adelstein and Michael Copps urged the GOP-led agency to reform the DE program to close what they see as a huge loophole allowing national mobile-phone carriers and others to effectively act as fronts for small businesses seeking to enter the wireless space.
Martin finally moved forward in February. Last week he explained why.
“These changes to our designated-entity rules arose out of a last-minute proposal in the proceeding to adopt rules for the advanced wireless services spectrum,” Martin said. “While I supported examining potential changes to our designated-entity rules for future auctions, I did not believe the rules needed to be changed, especially in advance of the auction this summer. Nevertheless, I agreed to the changes in order to obtain the support needed to establish the rules for wireless services that were essential to making the spectrum available for wireless broadband services this summer.”
Congress in 1993 called on the FCC to make wireless opportunities available to women, minorities, small business and rural telecom carriers, but a 1995 Supreme Court decision forced the agency to narrowly tailor the DE program to small and very small businesses.
Adelstein, in a statement, repeated his frustration with Martin’s handling of the DE proceeding and hinted that problems remain.
“I support the specific clarifications in this order on reconsideration because they in part respond to legitimate concerns from designated entities regarding the possibly retroactive application of new rules,” said Adelstein. “I have this lingering concern, though, that the commission’s course of action in this troubled proceeding, notwithstanding the legal maneuvering in this decision, may still leave other issues unresolved.
As I have noted before, much of this uncertainty could have been avoided had we started this proceeding earlier and kept it more narrowly focused. I hope that the commission’s decisions over the past several months do not prove to be the undoing of our most significant auction in 10 years.”
Commissioner Deborah Taylor Tate, a Republican who recently visited Alaska, said the issue was a tough balancing act.
“I am sympathetic to the concerns of DEs, who argue that requiring repayment of license discounts prior to the end of a 10-year `hold period’ will discourage investment and potentially limit a significant portion of designated-entity participation in future spectrum auctions,” said Tate. “I therefore concur in this decision knowing that our efforts were to strengthen, not weaken, the purposes of the DE program to ensure against the potential for fraud, waste, and abuse, as well as to provide adequate notice in order that the AWS auction can occur in a timely and fair manner.”
The backdrop for the Democrats’ push for DE reform at the FCC is a major auction fraud lawsuit pending against Wall Street magnate Mario Gabelli. Gabelli denies any wrongdoing.
