by Matthew Lasar Jan 6 2006 - 12:00am Auctions
In the shadow of an FCC auction scandal, the Federal Communications Commission has proposed toughening its rules for giving small businesses breaks in the competitive bidding process for wireless spectrum. The Commission presently reserves portions of the spectrum for "designated entities," or small business applications, and offers them extra bidding credits in the auction process.
But although Friday, February 3rd's FCC statement claims that the Commission has made "substantial efforts to ensure that only legitimate small businesses obtain the benefits of the designated entity program," a major lawsuit-in-progress suggests otherwise. In December, the Wall Street Journal reported on a Federal suit charging billionaire money manager Mario Gabelli with allegedly fronting a team of cell phone "small businesses" who bought FCC auctioned spectrum at huge discounts (see lasarletter, December 12, 2005).
According to the report, some of these companies' "owners" had no experience with cell phones. One told the court that she did not know what spectrum was. What all these companies did have in common was financial backing from Gabelli. In most instances they then sold the spectrum off at many times the purchase cost. Gabelli profited handsomely from the sales.
Friday's proposals come in the wake of the Gabelli scandal. They include the requirement that the Commission offer no extra breaks to bidders who enjoy "a 'material relationship' with a large entity that has a significant interest in the provision of communications services." The idea comes from Council Tree Communications, a legit broadcasting investment firm that specializes in promoting ownership by women and minorities.
The Commission hopes to have these new rules in cement by its upcoming Advanced Wireless Services Auction, planned for June 29, 2006. FCC Chair Kevin Martin says he wants to implement the concept throughout competitive bidding. "Why single out large wireless carriers alone for this kind of treatment," he asked in a statement issued on Friday the 3rd, "and allow large wireline carriers, cable companies, satellite providers, and other communications companies to continue to participate in a program for small businesses?"
