Last Friday, we put out a statement on incentive spectrum auction legislation and concerns we had that the FCC was seeking authority to pick and choose which companies would be allowed to participate in future spectrum auctions.  After reading the Commission’s response, it seems that the agency is missing the point entirely.

The FCC maintains that its “goal and intention is that every carrier — big, medium, or small — that needs additional spectrum should have a meaningful chance to bid for it.” (emphasis added).  That concept, ironically, is entirely consistent with pending legislation for incentive spectrum auctions, which states that the Commission cannot prevent an entity from participating in the incentive spectrum auctions if that entity meets the technical, financial and character qualifications required to hold a license. (It should also be noted that it’s consistent with the economists’ letter to the President the FCC referred to in its response to our statement).  The proposed statutory language ensures any qualified entity’s right to participate in the auction and prohibits the FCC from blocking an otherwise qualified bidder from participating in the auction – i.e., creating rules designed to pick winners and losers in the auction itself.

The FCC has done some creative tinkering with auctions in the past, with dubious results.  For example, the FCC created set asides for Designated Entities, which led to valuable spectrum laying fallow for years when a major DE landed in bankruptcy.  They also imposed conditions on both the C Block and D Block spectrum in the recent 700 MHz auction.

From AT&T’s perspective, however, we fear that this time around, some of its tinkering may be aimed at specific auction participants, like us.  Why are we fearful?

Two years ago, in the license transfer deal between SkyTerra and Harbinger (now known as LightSquared), a mysterious condition appeared at the last minute that imposed conditions if LightSquared were to engage in a commercial relationship with AT&T or Verizon.  Not a single commenter in that proceeding asked for any conditions, yet that one miraculously appeared at the 13th hour (the actual first mention of the infamous Verizon/AT&T condition was not posted on the FCC website (March 31, 2010) until 5 days after the FCC had approved the Order (March 26, 2010)– and over a month after that particular ex parte had been filed (February 26, 2010) at the agency, see screen shot below.

And let’s not forget that the FCC’s annual Wireless Competition Reports no longer address the competitiveness of the wireless industry (which is frankly remarkable to anyone who just came back from CES).  Instead, the report discusses the different “values” of different swaths of spectrum, like the below 1 Gigahertz spectrum that would be auctioned off under this legislation, which could make it harder for certain carriers to obtain that spectrum.

And in our recently approved Qualcomm acquisition, the FCC originally proposed for the first time to move the spectrum screen downwards, and to change the definition of what spectrum qualified for that screen.

So, yes, we are concerned that the FCC might actually design auction rules that radically restrict AT&T’s ability to participate in these auctions, which is why we care about this language.  Now, if the FCC wants the specific authority to actually block qualified companies from purchasing spectrum or limiting the spectrum they can purchase in these auctions, then it should be transparent and upfront with Congress about its intentions – as well as its reasoning for seeking such authority – so we can all have an informed public debate about the issue.

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