Satellite to sit out 700 MHz auction: Verizon Wireless questions DE rules

It is beginning to look increasingly unlikely that satellite operators will participate in the upcoming 700 MHz auction, partially due to rules guaranteeing the satellite industry a role in the deployment of a nationwide commercial-public safety broadband network in the band. The situation is in stark contrast with the sector’s limited participation in last year’s bidding for advanced wireless services licenses.
In a filing with the Securities and Exchange Commission, the DirecTV Group Inc. said it will not be involved in the 700 MHz auction that begins Jan. 24. Digital TV competitors DirecTV Group and EchoStar Communications Corp. teamed up to aggressively bid on AWS licenses before pulling out of last year’s auction.
EchoStar has not publicly stated whether it will enter the 700 MHz auction, but it appears unlikely as doing so would bar it-owing to FCC anti-collusion rules-from any transaction talks with AT&T Inc. AT&T Mobility, the nation’s No. 1 mobile-phone operator, is expected to bid on 700 MHz licenses.
Mobile Satellite Ventures said it will not participate in the 700 MHz auction, but it is not shy about saying it wants to be the satellite operator of choice for the winner of commercial-public safety D Block license. FCC rules require that satellite capacity be built into to at least one handset operating in the D Block.
Frontline Wireless L.L.C. indicated it plans to bid on the D Block license, but Verizon Wireless is challenging a recent rule waiver that is key to the Silicon Valley-backed startup’s 700 MHz bidding strategy and business model. The nation’s No. 2 mobile-phone operator, which confirmed it plans to bid on 700 MHz licenses as well, asked the FCC to reconsider a waiver of the small business, or designated entity, bidder rule. Under the rule, a DE is eligible for a bidding discount up to 25% so long as it does not wholesale more than 50% of its spectrum capacity. But for the D Block, the FCC waived that provision, finding that unique circumstances, obligations of the D-Block licensee and other factors made strict application of the rule unnecessary.
Indeed, Frontline Wireless earlier this week revised its regulatory challenge to the FCC’s 700 MHz decision by dropping its opposition to reserve prices for auction-bound licenses, saying the agency’s waiver order adequately addresses those concerns. Frontline is pursing a wholesale wireless business model.
Verizon Wireless said the waiver is unlawful, could undermine the FCC’s public-safety objective and “creates a loophole that will allow a group of wealthy individuals-including two billionaires on the Forbes 400 list of the wealthiest people in America-to exploit a program created to promote the entry of small businesses into the communications field.” Verizon Wireless said Frontline principals Ram Shriram and John Doerr are those two billionaires.
“This challenge has one purpose: ensure Verizon faces little competition in the future. It is without merit and should be summarily dismissed,” said Gerard Waldron, an outside lawyer for Frontline.