The legal squabble over the value-added tax (VAT) rebate for 3G license purchases shows how badly the European spectrum allocation system needs revamping, a spokesman for the GSM Assn. (GSMA) said Fri. Last week, the VAT tribunal -- part of the U.K.’s Dept. for Constitutional Affairs -- referred to the European Court of Justice (ECJ) a claim by several U.K. 3G mobile operators for a refund that could amount to nearly $6 million. The case reportedly may be combined with similar claims filed by operators in Austria, Belgium, Germany and Spain. It could set a precedent on whether VAT must be paid in 3G license auctions. The questions referred to the ECJ “regard matters of European law [that] are relevant to the action being pursued by all 5 successful bidders in the 2000 3G spectrum auction for the recovery of the VAT component of their winning bids,” a Vodafone spokesman said. An ECJ decision isn’t expected for about 2 years, he said. Meantime, the action before the VAT tribunal has been stayed. U.K. and German spectrum auctions accounted for 76% of 3G license fees worldwide 1999-2002, the GSMA spokesman said. Cumulatively the licensing proceeds took more than $100 billion from operators. One consequence was that $700 billion was “wiped off the stock market valuations of European telcos,” he said. The need to rebuild balance sheets caused a “massive downturn” in capital spending, forcing a “significant contraction” of the telecom equipment industry and producing thousands of job losses -- and a slowdown in 3G rollout, he said. The claim raises the question whether auctions are the best way to allocate spectrum, the spokesman said. The issue is moot in some ways because the current licensing round is now finished. However he said that GSMA, which has members in 209 countries and territories, intends to be “more vociferous” than it has about spectrum allocation methods. There are “dozens” of consultations around the world on spectrum, the spokesman said, and GSMA is active in all of them. In its ongoing dialog with regulators, he said, GSMA tries to ensure “that similar situation do not repeat themselves in future by helping regulators look at the bigger picture.”
The Minority Media & Telecom Council said in an FCC filing that while the designated entity (DE) set-aside in spectrum auctions isn’t a perfect mechanism, it mustn’t be scrapped. “Like most federal programs, the DE program is imperfect and can be improved,” the group said in an ex parte filing at the FCC, in a docket exploring a wireless carrier proposal to eliminate such set-asides: “If a ‘compromise’ is to be struck, then, it should be for the Commission to continue the DE program in its present form, while at the same time taking note of legitimate criticisms… raised by both its supporters and opponents.” CTIA and T-Mobile met with Comr. Adelstein last week to lobby him to back an end to set-asides. T- Mobile argued: “An analysis of the top auction winners demonstrates that the DEs overwhelmingly either are in financial distress or have sold their licenses.” T-Mobile said at a minimum the licenses returned by NextWave should be sold without set-asides. “FCC has fiduciary responsibility to ensure that the NextWave licenses are open to all bidders to maximize the benefit to U.S. taxpayers,” T-Mobile said. CouncilTree, a leading DE, met with Chmn. Powell last week to urge the FCC to “stay the course” on the auction. “Any further weakening of the DE rules/closed licenses denies broadband PCS entry opportunities for: small businesses; new entrants; minority and women-owned businesses.”
Auctioning off a nationwide block of spectrum is an “interesting opportunity,” a senior FCC official said Thurs. In a Communications Daily audioconference, Bryan Tramont, chief of staff for Chmn. Powell, said the Commission is considering that in a future auction, which would be welcome news for national carriers and their Wall St. backers. Tramont and 2 former FCC officials also engaged in a debate over the future role of designated entities (DEs) in spectrum auctions. Tramont made clear that the FCC is on schedule with its Auction 58 of 234 10- MHz licenses, many of which are coming from NextWave. The conference took place a week after the FCC dismissed concerns of some carriers about moving forward with its H- block auction (CD Sept 10 p1).
CTIA said in a filing at the FCC it would support the agency making available a single 20 MHz block to be auctioned on a RSA/MSA basis if the Commission moves forward on a long- pending auction for advanced wireless services. CTIA said it can’t support a Rural Cellular Assn. (RCA) proposal to make several blocks available, but could support offering a single block in a form that may be more attractive to small carriers. Sources say the RSA/MSA level is the smallest the FCC appears willing to consider as it takes up an auction of spectrum in the 1.7 GHz and 2.1 GHz bands. CTIA said taking this step “would be an appropriate means of encouraging effective small and rural carrier participation in the AWS auction.” CTIA initially opposed a RCA petition seeking more spectrum for smaller license areas. “RCA has been trying to persuade CTIA to support more spectrum for small license areas,” David Nace, RCA gen. counsel told us Tues. “We think it’s a step in the right direction.” CTIA and RCA have found common areas of agreement on auction issues in recent days. Last week, RCA said, in support of CTIA that while it didn’t necessarily support a complete end to all set-asides for designated entities it views bid credits as a more effective mechanism for making sure small carriers are victorious in spectrum auctions.
Senate Commerce Committee Chmn. McCain (R-Ariz.) will “shortly” introduce a bill to reauthorize the Corp. for Public Bcstg (CPB), an aide told us. The CPB was last reauthorized in 1992. Meanwhile, public broadcasters are bracing for the perennial assaults on issues such as objectivity and balance in their programs and local vs. national programming at a July 13 reauthorization hearing called by McCain, even as they hope that the reauthorization is straightforward. They also expect to be probed on proposals for a trust fund in exchange for early return of their analog spectrum. Differences have cropped up over the voluntary nature of the proposal by the Assn. of Public TV Stations and suggestions from PBS that a $5-$10 billion payment into the trust fund from spectrum auctions replace annual appropriations.
House Budget Committee Chmn. Nussle (R-Ia.) introduced legislation Fri. that would “reaffirm the intent of Congress to use the auction process and competitive bidding for the grant of commercial spectrum,” his office said in a release. The bill would require the FCC to auction its spectrum allocations, including spectrum being sought by Nextel. However, Nussle’s spokesman said the bill isn’t out of concern for the Nextel situation. “The concern is that at the end of the day, the taxpayers should receive the benefit of this public resource,” he said.
CTIA Pres. Steve Largent expects major carriers to look to Capitol Hill for support in changing the rules for Auction 58, scheduled for Jan., which set aside a majority of licenses that will be auctioned for purchase by smaller carriers considered to be designated entities (DEs). Largent said members of Congress are “protective” of the revenue from spectrum auctions, but it appears unlikely the FCC will reverse course. “It’s just a dumb provision,” Largent said. “There are numerous ways that are apparent to everybody that people work around the DE [requirements]. What’s the point?” Asked about the FCC changing the rules, FCC Comr. Abernathy noted Thurs. that the Wireless Bureau has supported providing some licenses to just DEs. “I know it’s the rules the bureau wants to use,” she said. “Some of the large players wish there were fewer designated entities, but as of right now I'm unaware of any proceeding that would change that.”
Even as the public broadcasters’ proposal for a trust fund in exchange for early return of public TV’s analog spectrum appeared to be gaining traction in Congress, differences have cropped up between PBS and the Assn. of Public TV Stations (APTS) over at least 2 aspects of the plan. A PBS board meeting in Arlington, Va., Tues. was told that Senate Commerce Committee Chmn. McCain (R-Ariz.) has called for a “brainstorming” session with PBS and APTS leaders on the trust fund plan. Differences between PBS and APTS centered on the voluntary nature of the APTS proposal and PBS’s suggestion that a one-time payment of $5-$10 billion replace annual federal appropriations.
Reaction was generally positive to the FCC’s adoption Thurs. of new band plans for the wireless, educational and satellite industries. “The hard work by the Commission and relevant stakeholders will lead to huge benefits for the public in receiving advanced wireless services under flexible use conditions, whether the user seeks mobile, portable or fixed services as optimal,” said Wireless Communications Assn. (WCA) Pres. Andrew Kreig.
The broadcasters’ analog spectrum band could be a windfall for wireless broadband, and other untethered services, witnesses told the Senate Commerce Committee on Wed. The Committee hearing on the DTV transition seemed to focus less on TV and more on the wireless and broadband services that would emerge once broadcasters relinquish the current analog spectrum band.