Spectrum, the radio waves we rely on to fuel interactions over our smartphones, tablets, wifi-enabled devices, and other wireless products, is a scare, valuable, and incredibly expensive asset. Over the past decade as the demand for mobile products and services has increased, so too has the cost of spectrum licenses, making it more challenging for minority entrepreneurs and other businesses interested in providing spectrum-intensive services to be actively engaged in this space.
In an effort to encourage greater participation by minorities and women as spectrum holders, the Multicultural Media Telecom and Internet Council petitioned the Federal Communications Commission, the federal agency responsible for spectrum allocations, to:
- consider secondary market transactions as a factor in whether to give a carrier rule waivers relating to ownership, including the mergers and acquisitions (“M&A”) context, and possibly attendant to the IP Transition;
- consider secondary market transactions as a factor in determining whether to report to Congress that the wireless marketplace is competitive;
- work with Congress to restore and refine the Tax Certificate Policy so that it would apply to secondary market transactions, enabling the seller to defer payment of the capital gains taxes on the sale upon reinvestment in comparable property; and
- provide carriers that engage in secondary market transactions with a modest bidding credit in wireless auctions, or an opportunity to pay for the spectrum in installments.
The FCC rejected that petition and instead adopted a set of Competitive Bidding rules that, in many ways, curtail the participation of Designated Entities (minority and women-owned businesses, and rural telephone companies) in the spectrum auction process and inhibit their ability to compete with larger wireless carriers for the acquisition of spectrum.
In this context, MMTC last week filed a petition for reconsideration asking that the Commission take another look at secondary markets as a means of incentivizing the participation of DE’s in the wireless industry. Stating that “the Competitive Bidding R&O identified the need for secondary market incentives, but did not approve any,” MMTC’s petition presents a written declaration by economist Dr. Coleman Bazelon, an expert in the economics of secondary markets in wireless who regularly advises legislative and regulatory bodies, analyzing its previously submitted proposals.
According to Dr. Bazelon, “auctions are not the only way that firms gain access to licensed spectrum” and “as auctions become less of an opportunity for new entrants, secondary market transactions provide carriers—and potential carriers—the access to spectrum needed to facilitate entry into the wireless sector.” Further, he said, “the secondary markets policy also helps the FCC meet its obligation to promote efficient spectrum use of a scarce commodity among a wide range of competitors, including MWBEs” and “the FCC can facilitate these transactions attendant to mergers or acquisitions.” MMTC’s petition also asks the Commission to issue a Further Notice of Proposed Rulemaking seeking comment on its proposals.
“While the Commission has made some progress on the Designated Entity program, it’s simply not enough,” stated Kim Keenan, MMTC President and CEO. “MMTC is encouraging the Commission to re-open this matter with additional evidence from an expert in this field so that there is a record to begin developing more opportunities for minority-owned businesses interested in owning spectrum licenses.”