FCC's proposed rules would block joint spectrum auction bidding among Tier 1 carriers

The FCC is proposing new rules for competitive bidding in spectrum auctions that would bar joint bidding arrangements among Tier 1 carriers. The proposed rules are also aimed at getting more small businesses, rural telephone companies and businesses owned by members of minority groups to bid in auctions.

The FCC voted 5-0 to approve the Notice of Proposed Rulemaking (NPRM), but the FCC's two Republican commissioners concurred on parts of the proposed rules and dissented on other parts. The rules are unlikely to go into effect before the start of the AWS-3 spectrum auction, which starts Nov. 13, but will likely govern next year's incentive auction of 600 MHz broadcast TV spectrum and other, future auctions.

Regarding the joint bidding rules, the FCC is seeking comment on its "tentative conclusions that it would be in the public interest" to keep existing rules that bar joint bidding arrangements among nationwide wireless carriers. The FCC is also seeking comment on whether national carriers can jointly bid with smaller ones, but takes no stance on that.

FCC Chairman Tom Wheeler first circulated a proposal in early August that would bar Sprint (NYSE: S) and T-Mobile US (NYSE:TMUS) from creating a joint venture to bid for spectrum in the incentive auction. That signal was likely one that led to Sprint abandoning its efforts to merge with T-Mobile.

The rules also address small businesses, rural phone companies and women and minority-owned firms, which are referred to as "designated entities," or DEs.

The NPRM proposes that designated entities (DEs) can lease their spectrum to large carriers. Previously DEs were required to provide "facilities-based wireless service"--meaning, they had to build their own wireless network. 

The NPRM would also increase gross revenue thresholds for DEs to get bidding credits, which would allow larger small businesses qualify for the credits. The proposal would also limit the timing and amounts of prior debts that would force small business to make larger upfront payments in order to participate in an auction.

Competitive Carriers Association President Steve Berry largely praised the proposed rules, pointing specifically to the rules that would allow joint bidding among non-nationwide carriers. "With respect to joint bidding arrangements involving nationwide carriers, CCA plans to take a close look at the FCC's proposals," he said in a statement. "We previously stated that we would oppose Commission action that would harm our carriers' ability to jointly participate in an auction; however, we agree with the FCC that fostering competition in the wireless market will ultimately benefit consumers."

However, the FCC's two Republican commissioners took issue with several aspects of the proposed rules, especially on leasing requirements. "The NPRM proposes to permit small businesses (known as 'designated entities' or 'DEs') to obtain taxpayer-funded discounts and then turn around and lease 100% of their spectrum to the world's largest corporations. It does absolutely nothing good for competition in the wireless marketplace to award bidding credits to entities that flip their spectrum to large incumbent providers," FCC Commissioner Ajit Pai wrote in his partial dissent. "To the contrary, it only makes it harder for small and regional facilities-based providers to win spectrum and compete on a level playing field. The Commission did not need to take this approach."

Commissioner Michael O'Rielly agreed: "It is hard to see how this wouldn't sanction middlemen to underpay the American people for their collectively owned scare resource (i.e., spectrum) and pocket the money while doing almost nothing," he wrote.

For more:
- see this FCC document (PDF)
- see these two separate Broadcasting & Cable articles

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