WASHINGTON-The Federal Communications Commission urged a U.S. appeals court in Philadelphia to reject a lawsuit seeking to delay the Aug. 9 advanced wireless services auction and to re-examine news rules designed to close a loophole enabling large wireless carriers to gain access to valuable airwaves at a discount by partnering with small-business applicants.
The FCC said Council Tree Communications Inc., Bethel Native Corp. and the Minority Media and Telecommunications Council have not met the legal threshold for granting a stay of the large spectrum auction, one expected to generate billions of dollars for the U.S. Treasury from the sale of 1,122 licenses in the 1710-1755 MHz and 2110-2155 MHz bands. Projected receipts from the AWS auction vary from a low of $4 billion to a high of $15 billion. The auction is especially critical for T-Mobile USA Inc., with the smallest of the four national carriers needing to beef up its spectrum position to support multimedia third-generation wireless applications. Short-form applications for the auction are due June 19.
The FCC told the 3rd U.S. Circuit Court of Appeals the harm to the public of further delaying the action-whose start date already was moved from June 29-far outweighs any loss the three parties might sustain if the sale of licenses goes forward as scheduled.
“The auction is the product of years of significant coordination between the FCC and other federal agencies to relocate existing government users of the pertinent spectrum so that it could be available for licensing at auction,” the FCC stated. “A stay would harm the public interest by delaying significant public benefits of the auction and frustrating the substantial public and private efforts invested in bringing it to fruition-directly contrary to Congress’ intent that spectrum auctions be used to promote the `rapid deployment of new technologies, products and services for the benefit of the public … without administrative or judicial delays.”‘
Interestingly, the FCC and Council Tree/Bethel Native/MMTC each invoked congressional intent and used similar arguments, but couched them differently in their 3rd Circuit filings. In 1993, Congress directed the FCC to promote diversity and competition in the wireless industry by making bidding credits and other benefits available to designated entities-women, minorities, small business and rural telephone companies-in spectrum auctions. The FCC scaled back the DE program after the Supreme Court curtailed government affirmative action programs in 1995.
At issue is the FCC’s June 2 ruling, which largely upheld an earlier decision tightening eligibility for a government program that gives DEs bidding discounts of up to 25 percent in spectrum auctions.
The FCC ruling was a marked departure from the FCC’s original plan to explicitly prohibit large in-region wireless carriers and possibly other major telecom companies from partnering with DEs. During the debate, the cellular industry said it would be unfair to bar wireless operators but not others in the telecom sector from joining forces with DEs. Last year, Council Tree petitioned the FCC to prevent large wireless carriers from entering into joint ventures with DEs.
In its lawsuit, Council Tree, Bethel Native and MMTC emphasized the surprise nature of DE rule revisions and pointed to accompanying statements by the four voting commissioners about the process leading to a DE reform initiative recommended by FCC Commissioners Jonathan Adelstein and Michael Copps last August, but only reluctantly launched by Chairman Kevin Martin in February.
The FCC disputed the three groups’ assertion that DE qualification changes came out of left field.
“Parties had clear notice that the commission contemplated addressing `material relationships’ with entities other than large wireless carriers,” the FCC said.
The FCC said the Council Tree challenge is analogous to one in 1995 in which Supreme Court Justice John Paul Stevens vacated a 6th Circuit stay of a spectrum auction. At that time, Stevens wrote he was “persuaded that the harm to the public caused by a nationwide postponement of the auction would outweigh the possible harm to respondent.”
On a related front, Justice Department lawyers next week plan to submit to a federal judge in New York a final settlement agreement ending an auction fraud lawsuit against Wall Street investor Mario Gabelli, Lynch Interactive Corp. and others. The 2001 suit-filed under the False Claims Act-accuses Gabelli of defrauding the U.S. government of at least $85 million by hiding his firm’s control of DEs in spectrum auctions during the 1990s. Some discounted DE licenses in which Gabelli’s Lynch was a partner subsequently sold for more than $200 million total. Gabelli has steadfastly denied any wrongdoing.
