FCC Republicans Question Designated Entity Moves

The FCC Republicans were not happy with portions of the FCC's Notice of Proposed Rulemaking on competitive bidding in spectrum auctions, particularly the upcoming broadcast incentive auction. The item passed, but not without the Republicans dissenting in part and making their unhappiness known.

The FCC voted to allow small businesses and minorities more opportunities to bid by, among other things, loosening restrictions on third-party leasing or requirements for higher upfront payments from bidders with past debt issues.

"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"

He said there were some parts worth exploring, but on balance called it a "lost opportunity" by DEs to get into the wireless business.

Commissioner Michael O'Rielly also took issue with the NPRMs proposal that DEs not have to be a facilities-based provider—allowing them to lease the spectrum to others.

"Given this likelihood, 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."

O'Rielly had a lot of issues, saying he could not support most of the item. He pointed to what he said was the inconsistency of that decision and the FCC's crackdown on broadcast joint sales agreements,

"I can’t ignore the apparent hypocrisy generated by what is being proposed here and the Commission’s actions to effectively ban joint sales agreements (JSAs) for television stations," he wrote in his partial dissent. "Just months ago, we were told that JSAs deceive the American public by allowing one television station, often of questionable financial situation, to contractually partner with another station in the market to perform certain functions. These agreements were considered offensive because the larger station supposedly would be able to influence the programming selection of the other broadcaster... Yet in this item, it is the flip side of the same coin, but the outcome is somehow different. We would be sanctioning small entities that acquired licenses with government subsidies to build partnerships with larger wireless providers. In this case, we are giving away money to entities that may never provide service whereas JSAs served the public interest by assisting stations, either in financial distress or not, to provide Americans with more and better programming options."

"Surely, if the contractual links created by JSAs were objectionable, then even greater opposition should be expressed over the newly proposed structures for DEs."

John Eggerton

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.