Anonymous Bidding Poses Risks, Challenges for FCC
The FCC decision to require anonymous bidding in the 700 MHz auction forced the agency to impose unprecedented controls on information. Even commissioners and their staff have had to sign nondisclosure forms to gain access to material on who is bidding for which licenses. Wireless industry sources fret about potential leaks that could give one bidder an advantage over other auction participants. FCC Chairman Kevin Martin said Thursday during a press conference that he couldn’t discuss whether the commission has looked into allegation of collusion before the auction began.
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Rules intended to guard the auction’s secrecy have stirred confusion and questions. Former FCC Chairman and Frontline Vice Chairman Reed Hundt raised red flags in Jan. 4 calls to commissioners declaring that Frontline would not make a down payment to participate in the auction, we have learned. Hundt spoke with at least three commissioners. The calls likely would not have violated anti-collusion rules because Hundt was calling regulators, sources said.
But commissioners had not been asked at that point to sign disclosure forms governing access to inside information. Upon learning of Hundt’s overtures, the General Counsel’s office immediately contacted commissioners and staff asking about the Hundt calls. One source of potential confusion is said to be that the FCC never has provided any information on which commissioners agreed to the nondisclosure rules or stated that different rules apply in the 700 MHz auction.
One wireless industry official said concerns remain about the leak potential -- a consideration absent when bidder information is fully disclosed. “Blind bidding is risky,” the source said. “If, for example, there is a leak how is that handled? It puts pressure on the commission itself to keep the lid down on all that information… The stock market is an auction on some levels, right? That’s fully transparent.” The blind bidding rules could trouble companies if the auction runs for an extended period, he said. “You have some major publicly traded companies participating in the auction… They have obligations to disclose things under security law… Depending on how long this goes on there might be some other obligations to disclose what’s going on.”
Another industry official said this is the third FCC auction with anonymous bidding but the first major auction. “It took a little while longer for this auction to get going and some have attributed that to blind bidding,” the source said. “People were less sure of what was going on. It was a new dynamic for people to get used to. But it’s hard to know whether it has depressed pricing.” The official said the risk of leaks remains: “But I think the FCC has done a good job of scaring competitors about that. I think everyone is on watch.”
Martin defended anonymous bidding in a Thursday press conference, saying it was to discourage collusion: “All of the expert auction experts… and many of the public interest groups had advocated that we go to this kind of a blind bidding system to decrease the likelihood that anyone could be sending signals back and forth.”
Andrew Schwartzman, president of the Media Access Project, told us Friday his group continues to believe anonymous bidding protects auction integrity. “When you take out independent problems with the D-block, the other blocks have gone at very nice prices,” he said. “They're at $18 billion and counting” in the auction, he said.