FCC approves spectrum auction reforms

The Federal Communications Commission approved reforms Thursday to a program that critics say allows large corporations to take advantage of discounts intended for small businesses.

In a party-line vote, the commission approved a proposal to reform the discount program aimed at helping small, minority and woman-owned businesses and rural providers obtain valuable wireless spectrum. Those businesses are known as designated entities.

{mosads}During a spectrum auction that closed earlier this year, Dish Network claimed $3 billion in discounts by bidding in coordination with two smaller companies. That prompted an outcry among the firm’s competitors and in Congress, where Sen. John Thune (R-S.D.) has launched an investigation into the companies’ behavior from his position as chairman of the Commerce Committee. Dish says it did not violate the law.

But it appears as though the proposal approved on Thursday could stop other companies from attempting to follow Dish’s lead.

The order prohibits agreements between small and large companies to coordinate bidding strategies during an auction, as Dish did with the two smaller companies.

There will also be a cap on the amount of credits that a business can claim. In the 2016 auction, small businesses will be limited to $150 million in credits, and providers in smaller markets will be capped at $10 million.

It also creates a new bidding credit for rural providers with fewer than 250,000 customers.

But the commission’s Republican members said that the proposal failed to close loopholes that benefit large companies at the expense of consumers.

Commissioner Ajit Pai said that it would allow designated entities to engage in “regulatory arbitrage.”

“They can turn around and immediately lease every bit of that spectrum to AT&T, Verizon, Sprint and T-Mobile,” he said, taking issue with the lifting of a prohibition on leasing 100 percent of the spectrum obtained with discounts.

He also said the order should have included rules to stop wealthy owners from claiming the credits and stopping the use of multiple shell companies to evade the caps.

Most of the rules will go into effect 60 days after they are published in the Federal Register.

Wheeler portrayed the modified rules as attacking “economic inequality in one small way.”

The reforms are also part of a broader effort led by Chairman Tom Wheeler to prepare for next year’s spectrum auction. In an unprecedented move, the agency will buy airwaves belonging to television stations and sell them to mobile providers. Wheeler has called it a “once in a lifetime” occurrence for the broadcasters.

His efforts were set back this week when, less than 24 hours before the commissioners were to vote on proposed procedural rules for the auction, Wheeler pulled them from the meeting’s agenda. At issue was the contention that the commission hadn’t given interested parties adequate time to look at data released last Friday from a study conducted on possible outcomes for the auction.

The vote will be held in August, Wheeler said.

Also taken off the agenda was Wheeler’s recommendation to keep the block of spectrum reserved for smaller carriers at the level set last year. T-Mobile had requested that it be expanded to 40 megahertz from 30 MHz.