DE Reply Comments Show Continuing Disagreement on Future of Auction Bidding Discounts
AT&T told the FCC the results of the AWS-3 auction and comments in the proceeding offer the same conclusion: designated entity rules “are no longer serving their intended purposes or beneficiaries -- small businesses and new entrants in the wireless market” -- and are in need of “substantial reform.” Current DEs said none of the comments so far proves that sweeping changes to the program are necessary. Questions about the DE program have been raised since Dish Network bought $13.3 billion worth of spectrum for $10 billion through two DEs. Dish has said repeatedly it didn't violate FCC rules (see 1505190046).
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Reply comments were due Thursday on an April 17 Wireless Bureau public notice seeking further comment on the rules, in light of lessons learned in the AWS-3 auction. Comments were posted Thursday and Friday in docket 12-268. A week earlier, various commenters offered similar arguments in the initial comment round (see 1505150027).
AT&T and a coalition of small carriers proposed sweeping reforms to the DE rules in a May 11 filing at the FCC (see 1505110048). “The opening comments in this proceeding reveal that AT&T’s concerns are broadly shared and offer a range of possible reforms to the FCC’s Part 1 competitive bidding rules,” AT&T said. Many commenters support a cap on DE benefits and rules that would “prevent coordinated or collusive behavior by auction bidders,” AT&T said. The results of the AWS-3 auction and comments support a finding that the DE program “has strayed from its original purpose -- to provide opportunities for small businesses, rural telephone companies, and businesses owned by minority groups and women to participate in the provision of spectrum-based services,” the carrier said.
“Neither of two primary proffered justifications for proposed rule changes -- alleged problems with DE alliances with large investors and the impact of DE bidding on RLECs -- finds support in fact or data,” countered Council Tree, a longtime DE. “On the basis of the record before it, the FCC has all the facts and data it needs to preserve and enhance the existing DE program, to both further the Statutory Mandates and maximize the chances that the upcoming [incentive auction] will succeed.”
Getting capital to buy spectrum licenses “historically and presently eludes tribes,” the National Congress of American Indians said. Rules that would “rescind or increase limitations on certain bidding credits will only further prohibit tribal participation in future auctions, and cripple tribal efforts to deploy wireless services on their lands.”
The Competitive Carriers Association said smaller carriers could benefit from bidding credits as they take on Verizon and AT&T. CCA advised the FCC against “the urge to drastically curtail the availability of small business benefits as a knee-jerk reaction to the criticisms of particular DEs” in the AWS-3 auction. CCA pointed to a study it filed earlier at the FCC by economists Peter Cramton and Pacharasut Sujarittanonta “deconstructing bidding and prices” in the AWS-3 auction. “In fact, the study found that DE discounts significantly increased auction revenue,” CCA said.
The investigation into the use of discounts during the AWS-3 auction won’t lead to a delay of the incentive auction, FCC Chairman Tom Wheeler said Thursday during the press briefing after the commission meeting. Though it’s possible the investigation could lead to a re-auction of AWS-3 spectrum, it’s more likely to lead to Dish's owing additional money, Wheeler said. “This should be mildly positive for Dish given some investors’ concern that perhaps the entire auction could be overturned and Dish would lose its AWS-3 spectrum,” analyst Paul Gallant of Guggenheim Partners said in a research note. “While Mr. Wheeler did not indicate where the staff’s investigation of Dish stands, we suspect Dish will ultimately be found to have complied with FCC rules.”