September 14, 2005

The Federal Communications Commission and Congress may have differing opinions on upcoming auctions of third-generation and digital TV spectrum, warned the Rural Telecommunications Group earlier this week.

RTG said the FCC's idea of allowing combinatorial bidding could go against Congress' wishes that spectrum be made available to small rural carriers.

"RTG reminds the FCC of its congressionally mandated duty to craft auctions that disseminate licenses to small and rural bidders.

So far, all evidence regarding combinatorial bidding suggests that this mandate has not been met. If the 'threshold' concerns are not to be addressed, it is likely that combinatorial bidding will run afoul of the Communications Act," said RTG Counsel Caressa Bennet.

Combinatorial bidding allows auction participants to put together packages of licenses upfront rather than trying to outbid all players for the package of licenses they most want.

RTG represents rural, mostly small, carriers and has been a strong advocate for making more spectrum available in smaller chunks.

"Since RTG's members are small and rural carriers, they do not have the same resources as the large, nationwide and super-regional commercial mobile radio services carriers.

Simply put, RTG members are afraid that they may never be able to afford 'packages' of spectrum or compete with deep-pocketed nationwide carriers that desire packages that contain rural areas.

When RTG members have been successful in FCC spectrum auctions, it has been because the commission has wisely chosen to use small geographic license areas such as Metropolitan Statistical Areas and Rural Service Areas that de-link urban and rural areas," said Bennet.

RTG's advocacy comes as the large nationwide players want larger license areas, and the FCC generally has agreed with them.

The commission recently reversed course when it changed the license structure for the upcoming 3G auction, making more spectrum available in the way rural carriers want.

"Even if a small carrier places a higher monetary value on a small slice of rural spectrum, under combinatorial bidding with its emphasis on the maximization of revenue, the small carrier's lone bid is extremely unlikely to displace a substantial bid for a larger package containing the desired small slice of rural spectrum," said Bennet.

RTG said smaller license areas allow carriers to focus on quality of service issues, and it believes the quality of service is better in areas served by rural wireless carriers.

"Rural carriers do not have the same restraints as large, publicly traded carriers with their fiduciary duty to maximize the benefits to their shareholders.

Small, rural carriers, while certainly motivated by profitable market concerns, are more willing to respond to the telecommunications needs of their customers and neighbors than distant corporations," said Bennet.

Source: RCR News