Carriers Agree on Need for FCC to Change Former Defaulter Rule
Carriers large and small are making a concerted push to get the FCC to loosen its former defaulter rule before the AWS-3 auction. CTIA, the Competitive Carriers Association and NTCA jointly proposed revised rules, in a filing Friday (http://bit.ly/1v3cHMo). FCC officials indicated Friday the agency will seek additional comment on the rule as part of a rulemaking, but only for the TV incentive auction (CD Aug 4 p1).
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The former defaulter rule requires bidders to make 50 percent larger upfront payments for licenses if they defaulted on a license payment in the past or were delinquent on a debt owed to a federal agency (CD June 3 p1). Industry officials told us the rule required carriers to lay out an additional $619 million in upfront payments before the AWS-1 auction and $496 million before the 700 MHz auction. FCC officials said Monday changing the rule has gotten little discussion so far on the eighth floor.
Under the industry proposal, the restrictions would no longer apply for debt that occurred more than five years in the past or were resolved at least three years previously, or for debt less than $100,000 or 0.1 percent of the average annual revenue of the applicant. The restrictions also would not apply for applicants with an “investment grade” rating from one of the major ratings firms or for applicants with a certified letter of credit.
"This rule creates a significant issue for carriers that want to participate in the AWS 3 auction and the incentive auction,” said Scott Bergmann, CTIA vice president-regulatory affairs. “It’s a major issue for the large carriers and small carriers.” Bergmann said the rules are not “well targeted” to address concerns that bidders pay their bills when the auction is over.
Industry understands the rule is supposed to ensure auction participants are credit-worthy and financially sound, but “as of today this rule is overly broad and doesn’t serve that intent,” said CCA President Steve Berry. “CCA asks that the FCC revise this rule to promote broader, more robust participation in the AWS-3 auction.”
"There can be no doubt that the Commission can best fulfill the objectives of the Spectrum Act and its AWS-3 proceeding by ensuring maximum participation in the AWS-3 auction,” said the joint filing in docket 13-185. It said AWS-3 spectrum is critical to meeting carriers’ needs and “otherwise qualified entities should not be held back by nonrelevant past debts or defaults.”