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FCC partisan split on designated entity rule reforms

The Federal Communications Commission split along party lines once again, voting 3-2 on reforms aimed at helping small businesses and rural wireless providers competitively bid for airwaves at agency-led spectrum auctions.

The reforms might as well have been called the Dish reforms. The FCC came under attack earlier this year when Dish used two small wireless companies under the designated entity (DE) rules to snap up more than $13.3 billion worth of spectrum in the AWS-3 auction. The two entities then claimed more than $3 billion in discounts provided under the DE rules.

Under the reforms adopted Thursday, the FCC limits the credits designated entities can claim, limits the amount of spectrum DEs can lease to bidding partners and details what kinds of investor arrangements can qualify for credits.

The reforms adopted Thursday don’t turn back the clock on the Dish situation (the bids are still under review at the FCC).

GOP commissioner Ajit Pai, one of the earliest critics of the how Dish was able to game the system, slammed the new rules for ignoring directives from lawmakers.

“We were promised FCC action to close loopholes exploited by slick lawyers. Instead, we have the FCC’s blessing of new loopholes through which even a minimally competent attorney could drive a truck,” said Pai. “This order paves the way for DEs to obtain a 35 percent, taxpayer-funded discount on auctioned spectrum and then turn around and lease 100 percent of that spectrum to AT&T, Verizon, Sprint, or T-Mobile.”

Chairman Tom Wheeler was not happy with the dissent from his two GOP commissioners. “I’m surprised and disappointed that my colleagues are willing to limit opportunity and ignore the statute,” said Wheeler. “The wireless market has changed dramatically, as such the DE rules must as well….I’m baffled that those that practice regulatory humility want to micromanage down to the business model,” he added.

Solving the problem of designated entities has been a thorny issue at the FCC, which continues to revise its rules over time.

“We keep swinging back and forth between rules that allow gaming and rules so strict, DE’s can’t use,” tweeted Harold Feld, senior vice president of Public Knowledge, who also tweeted that he thinks the FCC’s latest proposal strikes the best balance.