Analyst: Intent of program isn’t possible given current wireless sector environment
Do regulations have a shelf life? In general, yes, as the things they were meant to regulate evolve and change over time, the rules lose applicability. The telecom space is no exception. Over the last two decades the Federal Communications Commission has made consistent efforts to keep their regulation in step with the changes in technology and markets, but now some are calling for the FCC to abolish one of its legacy regulations, the Designated Entity Program, entirely.
The FCC Designated Entity Program was first enacted by congressional mandate in 1993 to promote the participation of small business owned by minorities and women in spectrum auctions. The well-intentioned rule was at the center of the recent kerfuffle over Dish Network earning a 25% discount on $13 billion in bids during the AWS-3 spectrum auction. Dish secured the discount by bidding through a pair of bidding partnerships with Northstar Wireless and SNR. Dish Network owns 85% of Northstar with the other 15% owned by Doyon Limited, which is an Alaskan Native American tribal corporation. Under a 1993 statute, Native American corporations are automatically considered by the U.S. government to be a “very small business.”
Dish ultimately was stripped of the discounts following outrage from the commission and a Securities and Exchange Commission investigation. Doug Brake, a telecommunications policy analyst with the Information Technology and Innovation Foundation, pointed to the exploitation of the loophole as reason enough for the program to be scrapped. Quoting a 1987 essay by political commentator, author and academic Robert Reich, Brake argues that the DE program creates “regulatory miasma.”
Reich defined regulatory miasma as, “Each maneuver [by the regulated party] generates a counter‐maneuver from the regulatory bureaucracy and Congress; every feint and dodge, a more complicated prophylactic for the next encounter. The result, over time, is a profusion of legislative and regulatory detail that confounds American business.”
Brake argues in his essay that the DE program creates just this kind of miasma and points to the 2005 Congressional Budget Office report to back it up. The CBO report, Brake notes, is “critical of the program, outlining the large numbers of licenses that eventually flowed to larger companies”
Brake also questions the program asking, “Do the goals of the program still even make sense in the rapidly maturing wireless market? The DE program is structured in such a way to encourage small businesses to build out actual network facilities. The discount is on a key input for a wireless network—spectrum—and there are restrictions on re-selling the spectrum won at discount. It may have been possible in the late 1990s, but today a small business would have a real challenge in standing up the type of network that would actually serve customers any better than the already competitive national carriers.”
Others disagree; CCA President and CEO Steve Berry told RCR Wireless News, “Bidding credits have promoted rigorous participation in previous auctions, and CCA has been supportive of the Commission’s continued use of bidding credits in the 600 MHz incentive auction. All CCA carriers need access to low-band spectrum, especially smaller rural and regional carriers. More participants means more competition and greater revenues for the U.S. Treasury, which is good news for consumers and the economy. CCA’s smaller carrier members need access to more low-band spectrum so that they can continue to innovate and provide service to some of the hardest-to-reach places in America. The largest two carriers own the lion’s share of low-band spectrum, and bidding credits are one way of leveling the competitive playing field.”
