FCC Chief Proposes Rules Capping Bidding Credits to DEs in Wake of AWS-3 Auction
FCC Chairman Tom Wheeler proposed a cap on bidding credits any small business or rural carrier is eligible to receive in the TV incentive auction, while shifting the focus of the program to support spectrum buys by small, rural carriers. The competitive bidding rules in general place tough limits on the role designated entities can play in the auction. Auction items are to dominate the commission’s July 16 meeting, based on the agenda released Thursday. Unlike other auction decisions set for a vote at the meeting, the FCC hadn't briefed industry stakeholders on the changes to the DE program.
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The changes followed the AWS-3 auction, where Dish Network worked with two DEs to buy $13.3 billion worth of licenses for $10 billion (see 1504090053). The FCC is still examining whether to take any additional steps against Dish and the DEs. In May, AT&T and smaller carriers proposed that the DE program be changed to support spectrum buys by small carriers. Last year, commissioners disagreed sharply about whether to give DE Grain Management a waiver of the agency's attributable material relationship (AMR) rule (see 1407250069).
Wheeler is proposing a $150 million cap for small businesses and $10 million cap for rural service providers in the auction, according to an FCC fact sheet. In addition, he proposed a $10 million ceiling on the amount of bidding credits that any entity can use in the smallest markets. Wheeler also proposes to bar joint bidding in the auction, except for bidding agreements that are “solely operational” and disclosed in advance. Wheeler also proposes that the FCC retain the current five-year unjust enrichment and graduated repayment schedule. The FCC would also limit the amount of spectrum a DE can lease to any of its non-controlling disclosable interest holders, including investors, during the unjust enrichment period.
Public Knowledge Senior Vice President Harold Feld said the cap is probably the most problematic proposal in the draft DE rules. “A $150 million cap effectively precludes any small business from all major and even most midsize markets,” he said. “What is worse, the cap is wholly artificial and purely political. If we want the DE program to actually accomplish its goals of giving small businesses a chance to enter into the modern wireless market ... then we have to recognize that anything large enough to be effective is going to cost significantly more than $150 million.”
Commissioner Ajit Pai said the proposal could create additional problems for the DE program. "Those benefiting from taxpayer-funded discounts when buying spectrum should use that spectrum for the public’s benefit -- not just lease most or all of it to large carriers like AT&T and Verizon. Loopholes like this might be good for big business and small arbitrageurs, but they certainly aren’t in the interest of the American people, and they do nothing to further wireless competition."
Wheeler, as expected (see 1506170052), also circulated an incentive auction procedures public notice and the spectrum holdings order for the meeting. No one who asked for changes to proposed rules -- whether it was T-Mobile or broadcasters or AT&T and Verizon -- got all of what they sought, agency officials confirmed Thursday. “Our goal is to strike a fair balance,” a senior FCC official said.
The procedures PN in particular is critical to holding the incentive auction, as planned, next year, FCC officials said. “These are the detailed rules for determining the opening prices in the reverse and the forward auction, for setting the rules for reverse and forward auction bidding, and it is the chapter and verse of how this auction is really going to run,” a senior official said.
Among the policy calls, T-Mobile and other competitive carriers lose in their fight for an expanded spectrum reserve -- spectrum essentially set aside for competitive carriers. Wheeler also decided to kill the proposed dynamic reserve pricing (DRP) opposed by broadcasters. Among other significant policy calls, the PN proposes a 10 percent cap on impairment instead of the 20 percent cap originally proposed by the FCC. The FCC also plans to make more information available to carriers on exactly what impairments they face if they buy a particular spectrum license.
In a blog post Thursday, Wheeler characterized the competitive bidding changes he proposed as essentially pro-small business. “It has never been more vital to wireless competition to help smaller businesses obtain additional investment and offer more choices to consumers,” he said. “However, the Commission’s competitive bidding rules have not been updated since 2006. Nine years ago, most mobile subscribers still relied on 2G connections, while today we’re leading the world in 4G and looking towards a 5G future.”
Wheeler confirmed that he asked the commission to reject T-Mobile’s bid for a larger spectrum reserve. “The draft Order concludes that the current reserve size of 30 megahertz balances the desire to make low-band spectrum available to parties with limited holdings while facilitating competitive bidding for all auction participants,” he said. “There will be significant spectrum made available in all markets of the country to all bidders. As a result, consumers will benefit directly from competition in all parts of the country.”