AT&T, Verizon Seek Restrictions on Joint Bidding in Aftermath of AWS-3
Dish Network’s coordinated bidding with two designated entities in the AWS-3 auction, which allegedly allowed it to buy spectrum at a reduced price, shows why the FCC should further restrict joint bidding, Verizon said in reply comments on competitive bidding rules. AT&T also called for restrictions on joint bidding. But DE Council Tree defended the program as a whole and said it led to a more competitive AWS-3 auction. The comments were filed in docket 12-268.
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Verizon repeated assertions (see 1503050050) that Dish Network’s use of two DEs in the AWS-3 auction helped it to emerge as a dominant bidder in the auction. Dish and the DEs frequently placed identical bids on the same licenses at the same time, the carrier said. “Switching licenses from DISH to its DEs not only relieved DISH of liability for any payments -- it also reduced the group’s overall payment liability through the use of DE bidding credits, which ultimately saved it (but cost taxpayers) $3.3 billion,” Verizon said. “The Commission’s orders already expressly provide that all bidders remain fully subject to the antitrust laws, which prohibit collusion and other forms of bid rigging in an auction context,” Verizon said. “Despite that prohibition, in the recent AWS-3 auction, three applicants closely coordinated their bids and bidding strategies on hundreds of licenses.”
Council Tree, a DE that has bid in auctions since the early days of the auction program, said it wanted to “debunk” two myths -- that DEs should be restricted to only bidding for smaller licenses and that bidding credits hurt taxpayers.
Section 309(j) of the Telecom Act’s goals of wide license dissemination and avoidance of excessive license concentration “would be gutted if the FCC designed a DE program merely to facilitate small auction bids by DEs (e.g., for small markets or small spectrum blocks),” Council Tree said. Council Tree said small DEs would not have the money to buy bigger spectrum blocks without financial support from larger players. “Council Tree knows of no other business model by which DEs could realistically compete at the higher bid levels (e.g., in mid- and large-sized markets that need new entrant DE competitions),” Council Tree said.
Council Tree also noted the AWS-3 auction brought in bids that were $23 billion higher than the $18 billion projected for the auction. The “overlooked wildcard” that led to much higher bids in the AWS-3 auction than the AWS-1 and 700 MHz auctions was the “resuscitation of the DE program” prior to the AWS-3 auction, Council Tree said. “Phrased simply, the DE program is a money-maker for the taxpayer.”
AT&T agreed with Verizon that Dish’s use of the two DEs shows the need for reform. The record shows “certain bidders were able to circumvent the Commission’s auction rules to coordinate bidding activity in a manner that unfairly disadvantaged other bidders,” AT&T said. “By stacking two or three bids on individual licenses, parking bidding eligibility, obscuring true market demand, and reducing their exposure risks, the DISH entities achieved unfair competitive advantages that skewed the auction’s ultimate results.”
T-Mobile said the FCC should change its DE rules, but not eliminate joint bidding. “Rules that enabled unfair bidding practices or that skewed AWS-3 auction results must not be allowed to also undermine the incentive auction,” the carrier said. The FCC should consider rules requiring those listed as disclosable interest holders on more than one short-form application to certify they will not be privy to, or involved in, the bidding strategy of more than one auction participant. “The proposed certification would be an appropriate incremental step to reassure bidders that all auction participants are adhering to the Commission’s blind auction format, thereby addressing commenters’ stated concerns and ensuring fairness and transparency in the auction process,” T-Mobile said.
Banning all joint bidding “arrangements would only further entrench the Twin Bells’ dominant holdings of low-band, high-utility spectrum,” Sprint said.
The Rural Wireless Association repeated earlier calls for the creation of a Rural Telco Bidding Credit prior to the incentive auction in its comments. NTCA said the FCC should allow DEs to partner with rural telephone companies or other DEs, but not with nationwide carriers.
Bidding credits should be more readily available for smaller carriers, the Competitive Carriers Association said. The FCC shouldn’t ban all joint bidding as an “extreme, reactionary response” to the questions raised by bidding practices in the AWS-3 auction, CCA said. A wide range of joint bidding arrangements is “effective in facilitating robust competition and enabling participation by competitive carriers, including DEs,” the group said. Instead of a ban, the FCC should “refine its rules” to ensure “pro-competitive joint bidding” is still allowed, while “directly” addressing problems seen in the AWS-3 auction.