Teletruth, a consumer watchdog group, has filed a complaint with the FCC demanding that the agency revoke licenses allegedly purchased "under false pretenses" by AT&T, Verizon, Cingular, and T-Mobile. ', '

The group accuses these companies of creating "false fronts"—small businesses that then qualified for a 25% spectrum auction discount under the FCC's "designated entity" (DE) program. "This allowed these companies to secure valuable wireless spectrum at discounted prices," Teletruth charges.

The FCC designed the DE program to give startup companies a shot at spectrum in wireless auctions, but even FCC Commissioners concede that big companies sometimes finance the smaller firms that apply for the discount.

On April 25th, the FCC ruled that if a firm leases or resells 50 percent of their new bought spectrum to another company, they will lose their discount and be required to make "unjust enrichment payments" to the FCC, depending on the number of licenses involved. But the Commission did nothing to limit the financial relationship of DEs to big pocket firms (see LL-FCC, April 26, 2006).

"This is an industry-wide problem," Teletruth's complaint, filed yesterday, charges. "The system has been abused. While everyone knows and acknowledges that this is wrong, the regulators have decided to ignore it."

Teletruth is a consortium of telecom consultants, researchers and small ISP firms. Its complaint cites eight designated entities "with National Carriers Relationships" and singles out AT&T, Verizon, Cingluar Wireless, and T-Mobile for allegedly abusing the system, costing taxpayers over eight billion dollars. The filing asks the FCC to revoke licenses won "under false pretenses."

The complaint, also filed with the Security and Exchange Commission and the Department of Justice, warns that the FCC's upcoming Advanced Wireless Service auction, scheduled for June 29th, is "in jeopardy" unless the government takes action.

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