DE lawsuit targets 700 MHz auction

A small-business lawsuit to overturn the results of the $13.7 billion advanced wireless services auction is back on track, with the 3rd U.S. Circuit Court of Appeals agreeing to hold oral argument around the time the Federal Communications Commission expects to issue rules for the next huge auction for prized 700 MHz wireless licenses.
Council Tree Communications Inc., Bethel Native Corp. and the Minority Media and Telecommunications Council sued the FCC last June, hoping the Philadelphia-based appeals court would block the AWS auction and overturn revised eligibility rules for small businesses classified as designated entities. Those rules extended DE license sale restrictions from five to 10 years and denied incentives-such as license discounts up to 15 percent-to DEs that resell or lease more than 50 percent of their spectrum capacity.
The three parties argued bidding changes approved by the FCC did more to hurt small business than to help them.
The 3rd Circuit 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.”
The case had been largely dormant since October, following submission of written legal briefs.
In urging the 3rd Circuit to move forward, Council Tree, Bethel Native and MMTC linked the contested DE rule changes to the 700 MHz auction this fall. Congressional budget experts predict the upcoming auction of wireless licenses could raise up to $15 billion for the U.S. Treasury.
“If the approaching 700 MHz auction deadlines are combined with the need for DEs to make plans far in advance of spectrum auctions in order to participate in them effectively, the imperative for correcting the fundamental errors of the [2006 FCC designated-entity decision] as soon as possible becomes readily apparent,” Council Tree, Bethel Native and MMTC told the court. They asked the 3rd Circuit for oral argument the week of April 23 and a speedy decision.
The 3rd Circuit agreed to put the case on the front-burner, but left to a three-judge panel the question of issuing a decision on an expedited basis.
The FCC did not oppose the Council Tree request for oral argument next month, but disagreed “with petitioners’ characterization of the allegedly adverse effects of the challenged designated-entity rules.”
Council Tree, Bethel Native and MMTC previously argued new rules designed to prevent national mobile-phone carriers and others from exploiting bidding benefits for small businesses were haphazardly crafted and violated a congressional mandate to create new wireless opportunities for diverse entrants. The parties point to the AWS auction results that had DEs accounting for a very small percentage of total winning bids, an outcome they said is historically down and by far the lowest in comparison with the 74 percent of winning net bids DEs made on average in six comparable spectrum auctions during the past decade. Moreover, they said DEs won less than 10 percent of the megahertz/pops, compared with an 80-percent historical average.
The carrier arguably with the most at stake in the litigation is T-Mobile USA Inc., the smallest of the four national cellular operators. T-Mobile spent $4.2 billion for 120 licenses during the AWS auction to give it the kind of added capacity needed to support high-speed multimedia content delivery. Other national wireless carriers also scored big in the AWS bidding, which closed last September after the sale of 1,087 licenses in the 1710-1755 MHz and 2110-2155 MHz bands.