Designated Entity Order Under Construction, Closely Watched by Commissioners

A timeline released by the FCC last week suggests that the agency will take up proposed rules in Q3 and wrap up a DE order in the first half of next year (http://fcc.us/1iVcNjS). DE advocates tell us they hope for as much lead time as possible before the auction so that potential bidders have lots of time to wrap up financing and otherwise prepare for the auction. Commissioner Mignon Clyburn has said she’s working behind the scenes on revised DE rules, giving DEs plenty of time to prepare for the incentive auction (CD April 23 p14). The other commissioners are also watching the proceeding closely, FCC officials told us. The order is being written mostly under the direction of the Wireless Bureau, an agency official said Tuesday.

The Minority Media and Telecommunications Council, which has been spearheading advocacy of revised DE rules, said in a paper released in February that rules restricting DEs from reselling spectrum they buy in an auction on the secondary market meant few DEs took part on the last big auctions -- AWS-1 in 2006 and 700 MHz two years later (CD Feb 26 p1).

The rules need to be written in a way that ensures that DEs that want to bid in the auction will be able to do so, said Nicol Turner-Lee, MMTC chief research & policy officer, in an interview. The rules should make participation “attractive to investors and investment,” she said. “We want to make sure that DEs get a chance to participate.” Active participation by DEs in the auction is “long overdue,” she said. The FCC “ideally” will give DEs at least six months between release of final rules and the incentive auction, so that they prepare their bids and work on financing, she said. “We definitely can’t shortchange DEs by giving them a very limited window once rules are released."

MMTC has been meeting with the various commissioner offices, including with Ajit Pai last week (CD July 1 p9), and other FCC officials at the bureau level, Turner-Lee said. “We're very optimistic that the commission is taking the steps to finally act upon this and make it a priority,” she said. “The extent to which the rules reflect the new marketplace realities of DEs in the wireless market is still something that we think the commission needs to take into consideration.”

Fletcher Heald lawyer Raymond Quianzon said he represented several Indian tribal groups in the PCS auctions and views DE rules as critical. Communications Act Section 309 is “still on the books and it unequivocally requires the FCC to design auctions to achieve a wide dissemination of licenses to include small businesses, minorities and women,” he said. DEs need time to put together financing, he said. “Publicly traded companies already have large war chests and standing lines of credit with lenders,” Quianzon said. “Entrepreneurial bidders need much more time to build their arsenal. This may be the last spectrum train to leave the station for quite some time. The FCC has a statutory requirement to make sure that entrepreneurs are allowed to get on too."

Jenell Trigg of Lerman Senter, who has been active on DE issues, said she’s hopeful for timely action by the FCC. “The Chairman’s Office has said they plan to complete the DE proceeding in time for the spectrum incentive auction,” said Trigg, a communications lawyer, by email. “We've been told by the Chairman’s Office and Commissioner Clyburn’s Office that this is a priority for them. We will continue to push for a completed rulemaking."

Public Knowledge Senior Vice President Harold Feld said there’s “no reason” the DE rules can’t be revised in time for the incentive or even the AWS-3 auction. “I see no reason the FCC could not resolve this quickly and many reasons why they should want to resolve it to encourage participation by traditionally marginalized communities in what everyone expects will be the last significant spectrum auctions for the foreseeable future,” Feld said. (hbuskirk@warren-news.com)