WASHINGTON-The Federal Communications Commission and the wireless industry cautioned the 3rd U.S. Circuit Court of Appeals not to overturn results of the advanced wireless services auction if the three-judge panel finds the agency mishandled a rulemaking intended to prevent large cellular carriers and others from gaming a designated-entity program that offers bidding discounts to small businesses.
While the FCC and the mobile-phone industry argued the FCC acted legally and reasonably in approving changes to DE rules that critics claim were totally unanticipated, federal regulators and cellular operators at the start want to dissuade the 3rd Circuit from resorting to what amounts to a nuclear option-invalidating the AWS auction-if judges ultimately agree with Council Tree Communications Inc. and others that DE revisions were arbitrary and capricious.
“Even if petitioners were to prevail on the merits, there is no basis for the court to vacate the commission’s DE rules and set aside the AWS auction results,” the FCC stated in its brief. “In the event that the court determines that the commission provided insufficient notice-or inadequate explanation-of the revised rules, it should exercise its discretion to remand the commission’s action without vacatur, and it should not take the extraordinary step of setting aside the auction-an action that would cause severe hardship to the public interest.”
The 3rd Circuit in mid-June refused Council Tree’s request to delay the Aug. 9 start of the AWS auction, but said it shared concerns that the FCC “may have not sufficiently apprised interested parties that the commission was contemplating changes in the DE eligibility and unjust enrichment rules of the sort that it ultimately adopted.”
Arguably the biggest loser of any court decision to throw out AWS auction results would be T-Mobile USA Inc., the smallest of the four national cellular carriers and the one most in need of spectrum to support high-speed transmission of data-rich multimedia content. T-Mobile plucked down $4.2 billion for 120 licenses at the AWS auction.
Other national wireless carriers also scored big in AWS bidding, which closed Sept. 18 after raising an unprecedented $13.7 billion from the sale of 1,087 licenses in the 1710-1755 MHz and 2110-2155 MHz bands. As such, all four national carriers have a lot riding on the outcome of the case.
“Petitioners are simply unhappy that the commission did not resolve the issues exactly as they wished; but that is the commission’s prerogative,” said CTIA and T-Mobile USA in a joint brief. “Finally,” they added, “in no event should the court accept the petitioners’ invitation to vacate the rules or upset Auction 66. Such action would needlessly damage the auction participants, cause unconscionable delay in the rollout of new advanced services for consumers, and thwart a multi-year governmental process to move government users off the AWS spectrum to make it available to meet urgent consumer needs. If the commission’s rulemaking was defective in any way-and we submit that it was not-the choice of a remedy most consistent with the public interest is best entrusted to the commission.”
The FCC in April approved controversial rule revisions extending DE license sale restrictions from five to 10 years and denying incentives to DEs that resell or lease more than 50 percent of their spectrum capacity. At that time, the agency also sought further comment on options to hinder major cell-phone operators and others from access to DE benefits.
Council Tree, Bethel Native and the Minority Media and Telecommunications Council assert FCC modifications to the DE program veered significantly from an initial proposal to restrict investment in DEs by large incumbent cellular carriers. The parties also claimed new DE rules chilled investment in small business seeking to enter the space.
The FCC said DE participation was significant, though conceding non-DEs won most AWS licenses and accounted for the lion’s share of auction receipts. Fifty-seven of the 104 winning bidders were DEs. The FCC noted Council Tree’s principals have substantial involvement in one of the winning DEs. That DE and another, the FCC said, were among the top 10 winning bidders.
