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FCC chairman proposes changes to auction bidding rules to help small businesses [updated]

FCC chairman Tom Wheeler kept to his promise to make changes to auction bidding rules to give small and rural wireless providers a better shot at acquiring spectrum in the next auction and to make sure big companies don’t “game” the bidding process.

Wheeler circulated his proposal Thursday to the other four commissioners in advance of the agency’s next open meeting July 16.

The FCC came under attack earlier this year soon after the highly-successful AWS-3 auction. Northstar Wireless and SNR Wireless, two small wireless companies bidders in which Dish has a non-controlling majority interest, snapped up more than $13.3 billion in the AWS-3 spectrum auction, entitling the companies to more than $3 billion in discounts.

Accusing Dish of taking advantage of loopholes in the system, lawmakers and GOP commissioner Ajit Pai called for the FCC to tighten the rules before the commission holds the broadcast incentive auction of coveted low-band spectrum in early 2016.

Without pointing any fingers at Dish (the FCC is still evaluating the transfer of those spectrum licenses), an FCC official said the new rules will close those loopholes and “make sure the small businesses are running the show.”

Many of the proposed changes been would have prevented a bidding outcome like the Dish example, by prohibiting joint bidding agreements that involve a shared strategy.

“We’re putting designated entities on notice regarding the types of investor agreements that raise concerns about who’s calling the shots. “The rule is one bid per auction bidder,” an FCC official said.

Wheeler’s proposal contains lots of other technical changes, including putting a first-ever cap on the total value of bidding credits, strengthening attribution rules, and closer scrutiny of eligibility for small business bidding credits. But the details also have carve-outs for legitimate smaller and rural carriers by permitting non-nationwide providers to participate in joint ventures for a single bidder.

While Wheeler’s proposal is intended to close loopholes, GOP commissioner Ajit Pai said in a statement it will create more of them, signaling that the proposal as stands could be headed for another 3-2 commission vote.

“Chairman Wheeler is proposing yet more loopholes to allow corporate giants to abuse the designated entity program. For instance, those benefiting from taxpayer-funded discounts when buying spectrum should use that spectrum for the public’s benefit–not just lease most or all of it to large carriers like AT&T and Verizon. Loopholes like this might be good for big business and small arbitrageurs, but they certainly aren’t in the interest of the American people, and they do nothing to further wireless competition,” Pai said.