Potential Bidders Demand FCC Change Wireless Spectrum Auctions

Before the Federal Communications Commission begins the much-anticipated auction of the 700MHz band spectrum in January, several potential bidders want the agency to reconsider some of the auction rules — particularly rules designed to encourage new competitors like Google and Yahoo to get into broadband services.

Fledgling carrier Frontline Wireless asked the FCC this week in a petition to lower the minimum prices set for the spectrum licenses, a move that it said would be more fair to smaller wireless companies seeking to compete.

The FCC established minimum prices — or “reserve prices” — for each of the five spectrum blocks up for bid. If a reserve price isn’t met during bidding, the block is re-auctioned without the service conditions attached to it in the original auction. In the case of the highly coveted C Block, the FCC set a reserve price of $4.6 billion, with service conditions that include open platform provisions requiring the spectrum winner to allow customers to use the devices and software applications of their choice.

But Frontline said the possibility of re-auctioning spectrum without service conditions increases the likelihood for abuse. According to the company, bidders can undermine the open platform provisions from the outset by avoiding aggressive bidding in the initial auction, which would lead to a re-auction without the conditions.

“The incumbent bidders who have both the most money with which to bid and the most to lose from open access platforms, namely Verizon and AT&T, will rationally act to defeat the conditions by refusing to bid or low-balling their bids,” Frontline said in its petition. “Because the incumbents have deep pockets and can afford to bid high for the spectrum in re-auction, they will have effectively been given the opportunity to buy their way out of the open access conditions.”

But Frontline also said lowering reserve prices would encourage more bidders and force aggressive competition even among carriers hoping for a C Block re-auction — ensuring that open access conditions remain on the table.

Such an outcome has already been challenged by Verizon, which brought its complaints to court rather than to the FCC. In a suit filed earlier this month in the U.S. Court of Appeals for the District of Columbia, Verizon charged that the open platform conditions are arbitrary and capricious, exceed the FCC’s authority and violate the First Amendment.

In response, a coalition of public interest groups aimed to refute Verizon’s contention, arguing instead in a petition of their own that “more than 70 years of consistent Supreme Court precedent” belies Verizon’s position.

Like Frontline, the coalition — called the Public Interest Spectrum Coalition — wants the FCC to do more to maximize the number of new companies participating in the auction. The group, made up of the Media Access Project, Consumer Federation of America, Consumers Union and others, also asked in its petition for the FCC to prohibit any one bidder from winning licenses in both the C Block and the D Block.

The coalition, calling the FCC’s determination that the broadband market is sufficiently competitive today “highly suspect,” added that allowing one company to win licenses in both blocks reduces the likelihood that a new competitor will emerge, giving the winning company a huge advantage over its rivals.

Meanwhile, AT&T filed its own request with the commission to take another look at the auction rules, but did not take issue with the C Block and open access. Instead, the carrier asked the FCC to reconsider some of the rules governing winners of the D Block, which comes with public safety obligations. AT&T wants the commission to require, among other things, that public safety requirements are clearly specified before the auction.

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