Auction Delay Gives Big Spenders More Time To Reload

Communications Today, Feb 5, 2001

By Malcolm Spicer, mspicer@phillips.com

Wireless companies that spent billions in the Federal Communications Commission's recent PCS spectrum auction have more time to save their pennies for the next spectrum sale.

The FCC last Wednesday approved a petition filed by Verizon Wireless to postpone the commission's auction scheduled to start March 6 of spectrum licenses in the 747-762 MHz and 777-792 MHz bands. The FCC rescheduled the auction for Sept. 12, with a deadline of Aug. 17 for bidders to file applications to participate.

The Rural Telecommunications Group, which represents mobile operators in small markets that are not affiliated with major telcos, opposed Verizon Wireless' request. If the next auction started in March, the big spenders for U.S. spectrum wouldn't have time to amass the financial resources they need to continue paying billions for licenses, Caressa Bennet, the organization's general counsel, told Wireless Today, a sister publication to Communications Today.

"I think it's very clear the FCC is holding auctions to raise money for the [U.S.] treasury," said Bennet, of the Washington firm Bennet & Bennet.

Delaying the auction harms small companies, such as the rural group's members, she added. That's because many small firms won't be able to compete for new licenses after large companies have time to restock their bank accounts.

"If we didn't have to wait for them to refill their coffers, we might be able to go after some of the [700 MHz] spectrum," Bennet said. "I don't know whether we will be able to go after it in September."

Nonetheless, major telcos don't have unlimited time to build their auction war chests, she said. "The good news is the delay could have been longer."

Verizon Wireless, which is the U.S. joint venture of Verizon Communications [VZ] and Britain's Vodafone [VOD], declined to comment on the commission's decision. Bedminster, N.J.-based Verizon Wireless bid $8.8 billion for 133 licenses covering 150.7 million POPs in the FCC's auction of PCS spectrum in the 1900 MHz bands that ended Jan. 26.

Spectrum to be auctioned to commercial wireless operators in the 700 MHz bands is currently being used by UHF television broadcasters for channels 60-69. As part of the U.S. television industry's migration to digital service, UHF broadcasters have until Dec. 31, 2006, to vacate the 700 MHz frequencies. However, TV broadcasters must meet that deadline only if at least 85 percent of U.S. households have access to digital TV signals at that time.

The Bottom Line

Opponents of delaying the auction may petition the commission to reconsider the decision. The Rural Telecommunications Group doesn't plan to do that, Bennet said.

If the FCC is asked to reconsider the decision, Commissioner Harold Furchgott-Roth is ready to vote again against delaying the auction.

When Congress decided to sell the UHF spectrum, it instructed the FCC to conduct the auction in time to deposit the proceeds in the federal general fund before October last year. However, the auction was delayed from its initial scheduled of May 2000 to September last year and to March this year before the latest delay announced Wednesday.

"There was no legal or logistical basis for delaying the auction in the first place," Furchgott-Roth said in a statement.

"Each postponement points out significant commission shortcomings: noncompliance with the law, poor auction schedule management and the repeated disruption of public expectations," he said. "With each succeeding delay the credibility of our spectrum and auction management policies becomes more suspect. All of these factors underscore the need for this delay to be the final chapter in this continuing saga," he added.