FCC Considers Blind Wireless Auctions

The Federal Communications Commission (FCC) is considering a blind bidding process for wireless spectrum auctions, a move that is both supported and opposed by major wireless carriers, depending on their own spectrum situations.

The FCC votes Wednesday on whether to change the wireless auction process to prevent participants from knowing who else is bidding while disclosing only the top bids.

There has been some resistance to the move from wireless carriers. T-Mobile, for one, will look to widen its own wireless spectrum via an auction this summer. The FCC plans to begin the bidding for wireless licenses on June 29, and they are expected to bring in as much as US$15 billion.

The move could do a great deal to help prevent collusion or unfair bidding and reselling strategies.

Bogus Bidding

One major reason the FCC is contemplating the change is that a number of registered bidders for wireless spectrum auctions in the U.S. never make any bids at all, according to Ovum Vice President of Wireless Telecoms Roger Entner.

“They’re merely registered to see what the other guys are doing,” Entner told TechNewsWorld.

In addition, some companies aim to buy up spectrum that competitors want, or to buy spectrum to resell with no intention of using it, according to Ovum Vice President of Wireless Telecoms Roger Entner. However, a commitment to use the spectrum is a condition of participating in the auction.

The FCC is trying to “clamp down on financial speculation,” he said.

Fair Auctions

DataComm President Ira Brodsky finds nothing wrong with spectrum speculation by competing wireless firms. In the early days of cellular wireless, no one knew which spectrum would be most valuable later on, he noted.

Speculation is unlikely to be terribly prevalent in today’s wireless market, he said, opining that the spectrum auctions in the U.S. are better than any kind of administrative allocation.

“I believe spectrum auctions, as bad as they’ve been, are the fairest way to split up spectrum,” he said. “This way, at least it’s a matter of who’s willing to pay the most.”

Cash or Clean?

The FCC does need to revise auction rules, however, to get rid of special provisions currently on the books that favor some companies over others, he told TechNewsWorld.

Special rules for so-called designated entities (DEs), which have turned out to be no more than small company “fronts” for the larger carriers, are an ongoing problem within the wireless spectrum auction system. Some wireless companies, such as Cingular, do not need spectrum, while others, such as T-Mobile, do, Ovum’s Entner explained. Thus, wireless carriers’ positions on the proposed change differ.

“T-Mobile desperately needs nationwide licensed spectrum; they want to avoid preemption in a given market. Cingular, on the other hand, has plenty of spectrum at the moment,” he said.

This week’s vote will impact the upcoming wireless auction in June. Although a blind auction might make it more fair, it will mean less money for the government.

“If they close [bidder information], that means Uncle Sam gets less money, but it’s a cleaner auction,” Entner reiterated.

Posing Preferred

The issue of DEs — also to be considered by the FCC this week — may be more significant and have more impact on this summer’s auction than the blind bidding proposal, Yankee Group analyst Marina Amoroso told TechNewsWorld.

In past auctions, it has not been uncommon for large companies to have two, three or more DEs, which get preferential bidding because they are supposedly smaller companies, Amoroso explained.

The use of designated entity status does not necessarily skirt the rule of the law, “but it was skirting the spirit of the law,” she noted.

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