Commenters Say FCC Needs to Fix Designated Entity Program

The committee recommended the new category last year, after the 3rd U.S. Circuit Court of Appeals in Philadelphia, in Council Tree v. FCC, sent part of the DE rules back to the commission for further consideration. The committee’s proposal would expand the DE program to include those suffering trauma in connection with military service and to victims of unequal access to colleges or credit or of unequal treatment in hiring.

Verizon Wireless said it’s a strong proponent of diversity, but the recommendation is not an “appropriate” way of encouraging minority bidding in FCC auctions. “Instead, the Commission should use its pending rulemaking on the designated entity program to consider whether it can take other, more definitive and less subjective, actions to promote increased opportunities for all interested individuals, organizations and entities, to participate in spectrum auctions,” the carrier said.

"The current proposal for a new auction preference has the potential to be a race- and gender-neutral remedy for the difficulties faced” by women and minorities “in the highly competitive auction process,” said the United Church of Christ filing. Still, the filing said, the FCC must look closely at the effectiveness of current programs before making major changes. “More information is needed to assess the impact of the existing preferences as well as any other preference that may ultimately be adopted,” the filing said. The Media Alliance, the National Organization for Women, the National Hispanic Media Coalition, Free Press, the Rainbow PUSH Coalition and the Benton Foundation also signed the filing.

Council Tree said the FCC’s first goal must be to restore the effectiveness of the DE program. Council Tree said a series of changes to the rules has led to far fewer DEs bidding in auctions. The FCC no longer sets aside licenses for bidding only by designated entities, the commission has stopped offering an installment payment financing option for DEs, and it no longer allows smaller businesses to qualify for an auction with a reduced upfront payment, Council Tree said. “Despite its intentions, the Commission’s current competitive bidding rules heavily favor the large national incumbent wireless service providers and stifle diversity in communications,” it said. “Since 1995, the number and quality of Commission incentives available to designated entities in competitive bidding have steadily eroded."

"There is a wealth of literature that supports the proposition that persons who have overcome substantial disadvantages are more likely than others to use Commission licenses in the public interest,” said the Minority Media and Telecommunications Council. It said the DE rules are not working, as a result of changes that the FCC made in 2006, before the 700 MHz auction. “Prior to the changes in these rules, DE’s secured $23 billion, or 50 percent of the licenses, which plummeted to 3 percent or $1 billion after the change.” The council joined Council Tree’s challenge to the DE rules.

The National Telecommunications Cooperative Association said whatever the FCC does about DE rules, it should recognize that the current rules are broken. “NTCA’s members have found that the auction bidding credit is ineffective at providing a realistic opportunity for a DE such as a rural telephone company (most of whom are also small businesses) to compete with a nationwide provider seeking the same spectrum real estate,” the group said. The NAB encouraged the FCC to explore the proposal. “A program of bidding credits based on overcoming substantial disadvantage can reach a broader array of individuals,” the association said.