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Spectrum auction rules often include provisions intended to allow new entrants into a market, as a means of promoting competition. That once again is a disputed and contentious issue as the Federal Communications Commission looks towards auctions of 600-MHz spectrum sometime in 2016.

The immediate trigger is the use of “designated entity” bidding rules that allowed Dish Network–not a designated entity itself–to acquire a significant amount of mobile spectrum in the AWS-3 auction through its 85-percent control of a couple of smaller entities that do have the designation.

The issue now is fairness: whether it makes sense to allow big companies to benefit from rules intended to favor much-smaller companies. Some call the practice a “loophole.” But the practice is long standing in the mobile business.

In fact, some might argue, the practice is rife throughout all programs, used anywhere in the federal government, that use the practice, and that is virtually all federal programs, at some level.

The related issue is the desirability of “set asides” that might similarly be intended to promote competition, such as restricting the amount of 600-MHz spectrum AT&T and Verizon could win in the auction, reserving a major chunk of the available spectrum for “smaller” entities such as Sprint and T-Mobile US (and presumably Dish Network, again).

Though the issue of set-asides remains unsettled, Federal Communications Commission Chairman Tom Wheeler said the agency was looking at new rules to prevent big companies from taking advantage of “designated entity” programs.

“We are going to fix this,” Wheeler told the Senate Commerce Committee. “We are going to make sure that designated entities have the opportunity to participate and not have designated entities be beards for people that shouldn’t.”

Dish Network was a le to use the practice to acquire $13 billion worth of spectrum for $10 billion in the recent AWS-3 auction. The FCC has said the use of the credit mechanism was “under review.”

The issue of “spectrum set asides” has been contentious as well. FCC has been considering how to ensure that smaller wireless companies have a chance to compete at the sale.

In late 2014, the Commission decided to set aside as much as 33 percent of spectrum for “smaller” bidders. The mechanism to be used is that, at some point in each local auction, the spectrum set aside would go into effect.

At that point, once entities owning a least 33 percent of “low-band” spectrum would be prevented from bidding for any more spectrum in those specific markets.

The FCC’s threshold for setting aside spectrum in a market hasn’t yet been announced, but it could include some combination of the overall bids in the market, or the price per megahertz.
The FCC’s plan represents a victory for Sprint and T-Mobile, which have lobbied fiercely for limits on how much low-band spectrum AT&T and Verizon can buy at the auction.

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