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Martin Pitches Small-Business-Friendly Auction Rules

Federal Communications Commission chairman Kevin Martin said Wednesday that one reason why the FCC only applied open-platform requirements on one portion of the 700-meghaertz spectrum being auctioned this January is that small telecommunications carriers didn't want it to apply them to other spectrum.

Asked whether the open-platform rules would be bad for small businesses, Martin told the House Small Business Committee that one of the reasons why the commission did not apply them more broadly was that small businesses balked.

"That would have been another alternative I think the commission could have considered," he said. "We were actually taking their views into account by not applying it everywhere." He added that while the smaller carriers did not want open-access conditions on the spectrum they were interested in, they also were concerned that putting those conditions on the so-called C-block would drive some larger bidders to bid against them for the spectrum without those conditions.

But Martin did say that he thought open platforms -- where outside handsets and devices can connect to whatever national wireless service develops -- would benefit small businesses with new devices to sell.

The committee was holding a hearing on the effects on small businesses of the auction, in which the FCC will sell the rights to use beachfront spectrum formerly held by broadcasters and being reclaimed in the switch to digital TV.

Martin pointed out that the FCC, in its just-released rules for the auction, divided up the spectrum into smaller geographic areas to make sure that a "significant portion" of the spectrum would be available to smaller businesses.

The commission also provided up to a 25% discount on the winning bid price for small and very small businesses, and it set up rules to discourage flipping the licenses -- they have to be held for 10 years -- to an outside industry so that a small business could not front for a larger one.

Verizon Communications challenged the FCC's auction rules in court. Asked what the impact on the auction would be if Verizon won, Martin told Ohio Republican Steve Chabot that the D.C. court ruled last week that it would not hear the case on an expedited basis, so it would depend on when the court heard the case and whether it would be appealed.

He conceded that if the auction challenge was upheld, as happened with a previous FCC auction under a former chairman, the commission "would have to go back and undo the auction."

If that happened, it could have consequences for the DTV transition, since the DTV-to-analog converter-box-subsidy program -- which actually kicks off three weeks before the Jan. 24 start of the auction -- is being funded by $1.5 billion of the estimated $10 billion the FCC expects to take in.