DE Rule Consensus Eludes FCC, with Deadlines Approaching

Designated entity rules for the advanced wireless services auction seem in flux, with short form applications due May 10 and the auction set to start June 29. The FCC has 2 choices, sources said: approve rules consistent with a further notice of proposed rulemaking, or not propose any changes to DE rules before the auction. “There may still be negotiating going on,” one source said: “I wouldn’t read too much in the tea leaves.” The source said Chmn. Martin has yet to lay out a clear “drop dead” date by which time DE rules must be approved for the auction to proceed as planned.

Neither has Martin formally withdrawn a proposal to cut to $125 million the revenue threshold limiting carriers from partnering with a DE (CD April 5 p2), sources said Wed. The FCC had eyed a $5 billion limit. The $125 million threshold would bar many smaller carriers, not just national carriers, from partnering with a DE to buy licenses in the auction.

“They need to do it soon if they're going to do anything,” a regulatory attorney said of the FCC. “Now that they've set a date of May 10, they have to give people some time to figure out what they're doing.”

Comrs. Copps and Adelstein have pressed to change the DE rules before the auction. Copps repeated those calls in a statement last week on the public notice for the auction. “We have a solemn obligation to take a strong stand against abuses of the program,” he said. “We must not allow deep- pocketed companies or individuals to erode the integrity of our auctions by masquerading as small carriers.”

A DE source said the delay in acting on Martin’s latest proposal effectively could preclude the FCC from raising the threshold. “Fundamentally, their choices are do nothing or do what they said in the NPRM,” the source said. “The NPRM has been out there for months. DEs have had a chance to focus on the $5 billion.”

The FCC is getting varied advice on how to proceed, with some hinting at litigation if the FCC, at this stage in the game, deviates from the FNPRM to adopt the $125 million limit.

MetroPCS said it initially backed DE rule changes “but at this point would rather see no changes in the program than the institution of a radically altered program on short notice that has not been adequately vetted and considered.” Warned the carrier: “The risks of litigation, and other unintended adverse consequences (e.g. harm to legitimate designated entity participants) is simply too great.”

DE Council Tree, which had asked the Commission to tighten its DE rules, met with FCC Gen. Counsel Sam Feder to argue against adoption of the “materially lower” $125 million threshold. Council Tree said the lower threshold “is not supported in the record, would be a reversal of longstanding Commission policy with no meaningful opportunity for comment, would strand designated entities now preparing to bid in Auction 66, and would create the conditions for auction-threatening litigation.”