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FCC Proposes Tightening Auction Rules

The FCC has decided to change its rules for the auction of spectrum for advanced wireless services to try and make sure that the bidding credits and reserved spectrum blocks that are supposed to go to small businesses actually do so.

In issuing the notice of proposed rulemaking Friday, the FCC said it was prompted by evidence that some small businesses that apply for so-called "designated entity" status had already established a "material relationship" with a "large, in-region wireless service provider."

Translation: The small business bidder has agreed to sell the spectrum to a larger company that could not qualify for the discount.

The commission has also asked for comment on whether it should deny "designated entity" status to bidders with "material relationships" with cable providers, content or equipment companies, or other media interests.

The next auction for spectrum to be used for advanced wireless services is scheduled to begin June 29, 2006.

"We tentatively conclude," said FCC Chairman Kevin Martin, "that we should reform our program by preventing large incumbent wireless carriers from gaining access to bidding credits through partnering with designated entities.

"While I think that is a good step, I believe we should consider going further, applying the same rule to all large communications service providers.  Why single out large wireless carriers alone for this kind of treatment and allow large wireline carriers, cable companies, satellite providers, and other communications companies to continue to participate in a program for small businesses?"

In a seperate statement, Democratic Commissioner Jonathan Adelstein said he would personally review any attempts by large wireline companies to partner with "Designated entities."

"The Advanced Wireless Services auction could raise $15 billion dollars by some estimates for the federal Government at a time our budget is under ever increasing pressure," said Adlestein. "Do we really want the nation’s largest wireless carriers partnering with DEs to get a 25% discount so that auction revenues to the U.S. Treasury could potentially be reduced by billions of dollars?

Adelstein complained that the FCC had not come out with the proposal earlier--it began the process back in August--saying it would now be tough to meet the June 29 deadline for the next auction.

He also said he did not ncesessarily agree with expanding the prohibition beyond wireless to cable and other entities that wanted to partner with small businesses, saying that might be an appropriate way to bring more competition o the large wireless companies.