FCC Steps Toward DE Reform

Wireless Week writes that the FCC "issued a set of proposed modifications to bid winners' lease and resale of spectrum, and also tightened up eligibility on "designated entity" (DE) participants in spectrum auctions. Additionally, the FCC said it would audit bid winners and impose periodic reporting requirements on DE bid winners to monitor where the licenses where and who was using them."

According to the article, "the FCC's new rules will apply to the Advanced Wireless Services (AWS) auction slated for June 29 as well as other auctions, unless the agency chooses to change them further. The new rules would make a DE winner of spectrum licenses ineligible for that spectrum if the company sells or leases more than 50 percent of its spectrum capacity for any individual license to another company. Winners also would become ineligible for DE classification and would owe the FCC the bid credit amount plus interest if it entered into leasing or transferred its licenses to another non-DE company within five years. Six to seven years into the FCC's 10-year licensing term, a DE would have to return 75 percent of the bid credit amount, plus interest, 50 percent of the bid credit for years eight and nine and 25 percent of the bidding credit in year 10."

Roger Entner at Ovum opined that "this is the beginning of the end" of the old DE practices, where large national carriers used smaller carriers to bid on spectrum that was set aside for smaller carriers." He added, "Everyone except Verizon Wireless used DEs in past auctions as a way to get access to spectrum set aside for small carriers they could not get otherwise. Cingular had Salmon PCS. AT&T had Alaska Native. T-Mobile had Cook Inlet.The new rules would curb those relationships."