Last week, FCC Chairman Tom Wheeler posted a blog discussing potential changes to spectrum auction competitive bidding policies and the Incentive Auction rules.  The Chairman has circulated his proposals to the other Commissioners and anticipates that the Commission will vote on several items concerning these proceedings during the July Open Meeting on July 16th.  The Sunshine period will begin a week before the meeting, on July 9th.

Competitive Bidding Policies/DE Reform

According to the fact sheet, the reforms proposed by the Chairman aim to ensure that bidding credits are given to their intended recipients and do not allow large corporations to “game the system”.  Most notably, these reforms include establishing a new rural business bidding credit; establishing the first-ever bidding credit cap; prohibiting joint bidding arrangements; and eliminating the rule that requires small businesses to offer facilities-based wireless service before qualifying for bidding credits.

Cap on Bidding Credits: The Chairman proposes capping the total value of bidding credits a small business or rural provider is eligible to receive.  The cap will vary on a service-by-service basis.  For the incentive auction, there will be a $150 million cap for small businesses and a $10 million cap for rural providers.  The Chairman also proposes a $10 million ceiling on the amount of bidding credits that any entity can use in the smallest markets.

Stronger Attribution Rules: The Chairman proposes strengthening the attribution rules by retaining the 5-year unjust enrichment period and the graduated repayment schedule.  The Chairman also proposes limiting the amount of spectrum that a DE can lease to any of its non-controlling disclosable interest holders (i.e. investors) during the 5-year period.

Joint Bidding Arrangements: The Chairman proposes to prohibit strategic joint bidding arrangements, but will permit operational arrangements (e.g. roaming, leasing, etc.) if they are disclosed.  The Chairman also intends to permit DEs to participate in consortiums with other DEs; to permit non-nationwide providers to participate in joint ventures with other non-nationwide providers; and to generally prohibit multiple applications by one party or by parties with common controlling interests.

Creation of Rural Credit: The Chairman proposes to offer a rural bidding credit of 15%.  This credit will be available to rural carriers with less than 250,000 subscribers in primarily rural areas.

Modernization of Eligibility Rules: The Chairman proposes to reform the eligibility requirements for designated entities by eliminating the rule that requires small businesses to provide facilities-based service before qualifying for bidding credits, and by eliminating the assumption that a lease of more than 25% capacity to a large business requires revenue attribution.  Instead, the Chairman proposes to evaluate eligibility on a license-by-licenses basis.

Small Business Definition: The Chairman proposes to increase the revenue threshold for “small” businesses to account for inflation.  The proposed thresholds are as following: $4 million (35% credit), $20 million (25% credit), and $55 million (15% credit).

Incentive Auction Rules

During the July Meeting, the FCC will also vote on a separate item that preserves the current reserve size of 30 megahertz.  According to the Chairman, this reserve size “balances the desire to make low-band spectrum available to parties with limited holdings while facilitating competitive bidding for all auction participants.”

The Commission will also be considering a Public Notice establishing the bidding procedures for the Incentive Auction.  The update by the Chairman follows an earlier blog, in which he discussed the progress being made on the Incentive Auction.

Please contact us if you have any questions.