WASHINGTON-Council Tree Communications Inc. and other parties challenging changes to small-business bidding rules again hammered away at the Federal Communications Commission, telling the 3rd U.S. Circuit Court of Appeals that procedural irregularities in crafting new guidelines and the dismal showing by designated entities in the advanced wireless services auction justify throwing out Auction 66 results.
“The harsh fact remains: DEs won only 4 percent of the total value of the licenses sold at Auction 66, a startling drop off in DE performance when measured against comparable FCC auctions of the past,” stated Council Tree, Bethel Native and the Minority Media and Telecommunications Council. “In the context of an auction, where the marketplace separately values each license, total dollar value is the most relevant metric in assessing overall performance. There is simply no way in an auction like Auction 66, one that combines wide swaths of spectrum covering large regional footprints (selling at auction for up to $1.3 billion) with small bits of spectrum rooted in small localized rural areas (selling at auction for as little as $6,000), to make an intelligent assessment of DE success without looking at the value of the total spectrum auctioned.”
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 gaining access to DE benefits-including license discounts up to 25 percent-by partnering with small business applicants in FCC auctions.
In July, a federal court in New York approved a $130 million settlement of a DE auction fraud lawsuit brought by the Justice Department against Wall Street money manager Mario Gabelli and 38 affiliated companies.
Council Tree, Bethel Native and the MMTC argue FCC revisions to the DE program-created in response to a 1993 congressional mandate to increase diversity and competition in the-then duopoly mobile-phone market-veered significantly from an initial proposal to restrict investment in DEs by large incumbent cellular carriers. The three parties also claim new DE rules chilled investment in small business seeking to enter the wireless space.
The FCC and large wireless players-particularly No. 4 T-Mobile USA Inc., which spent $4.2 billion for 120 AWS licenses to shore up its relatively weak spectrum position at a time of transition to third-generation technology-told the 3rd Circuit overturning the AWS auction would slow the rollout of new wireless services to consumers, harm auction participants and undermine a multi-year government process to open new frequencies necessary to support high-speed, content-rich wireless applications.
The AWS auction generated a record $13.7 billion from the sale of 1,087 licenses in the 1710-1755 MHz and 2110-2155 MHz bands.
Council Tree, Bethel Native and MMTC said the sky will not fall if AWS licenses are re-auctioned.
“There is no proof that nullification of the Auction 66 results will result in less revenue to the U.S. Treasury,” the parties told the court. “If anything, a re-auctioning might reasonably be predicted to increase the aggregate amount of bids because DEs, without the 10-year-hold-rule and lease/resale restriction in place, would have the opportunity to participate in the new auction free of the shackles of these ill-conceived rules, providing additional competition for those large incumbents who want to preserve the existing results. Furthermore, certain spectrum that is the subject of Auction 66 remains subject to clearing by incumbent users and is not yet available for widespread construction, lessening the real-world impact of a re-auction.”
Oral argument has yet to be scheduled.
