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Support grows for FCC spectrum auction rule reform

Commissioner Pai started it; Chairman Wheeler committed to it; now Congress is getting behind the effort to revamp FCC spectrum auction rules that facilitate small business participation in wireless auctions.

The day after a contentious Senate commerce hearing which brought the auction rules to the fore, Congressman Frank Pallone, Jr. (D-NJ), ranking member of the House energy and commerce committee, introduced a 2-page, draft discussion bill directing the FCC to update its spectrum auction rules which are designed to help small businesses and encourage competition.

“Our rules have not kept up, but the slick lawyers have sure learned how to do it,” said Wheeler in asnwer to a question from Rep. Frank Pallone during the communications and subcommittee hearing on FCC reauthorization Thursday. “We are going to make sure. I’ll give you an ironclad commitment. We want to make sure we have a new set of rules in place before the auction next year.”

What triggered the bipartisan push was the way Dish Network (NASDAQ: DISH) funded two “designated entities” to gain access to spectrum in the recently completed AWS auction at a significant discount. Instead of paying $13.3 billion, the two companies would pay $10 billion by tapping into the FCC’s auction rules giving bidding credits to “small facilities-based bidders.”

The call for the rule updates is particularly important as the FCC prepares for the broadcast incentive auction, which has been described by Wheeler as “a once in a lifetime opportunity.” The planned 2016 auction will offer “beachfront” spectrum which is particularly well suited for wireless phone services.

As with any legislation or rule making, the goals can be noble, but the details will be the key.  AT&T (NYSE:T) and Verizon (NYSE:VZ) have both called for the FCC to eliminate set-asides and and bidding credits.  But smaller wireless carriers, like T-Mobile see it differently. T-Mobile (NYSE:TMUS) wants the FCC to set aside at least half the available spectrum in the broadcast incentive auction for smaller carriers.