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FCC Closes Wireless Spectrum Auction Loophole

7:10 am on April 28, 2006 | Category: Business, Regulation, Wireless

Americaâ€™s Federal Communications Commission has decided to tighten up wireless auction rules, effectively closing loopholes that allow carriers to obtain a discount on spectrum by teaming up with smaller rivals.

From now on, no discounts whatsoever will be available to companies that lease or resell more than half of their spectrum assets, even if they meet the proper financial criteria. Any company that resells or leases discounted airwaves within five years of acquiring them will be forced to repay the repay the entire discount before their license expires.

These new rules are the latest in a series of changes in preparation for a massive FCC auction set to start in just over two months. Hundreds of licenses will be sold for advanced applications like wireless broadband and video.

The upcoming sale could easily generate $8 billion to $15 billion for the FCC. Much of this business will likely come from German-owned T-Mobile USA, which is expected to be one of the most aggressive bidders.

In the past, big carriers including T-Mobile and Cingular Wireless have formed partnerships with smaller companies that qualify for spectrum discounts, for the express purpose of obtaining cheap wireless licenses.

This loophole will now be closed, however, in hopes of generating more revenue, and giving small carriers a fair and competitive chance in the market.

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