The communications sector is critical to our nation’s growth. When this vital sector in the innovation economy functions as a competitive marketplace, consumers, communities and taxpayers all stand to benefit through stronger and more expansive networks. When barriers to entry remain high and a few large carriers are allowed to dominate the marketplace — as has been the case for too long — consumers, communities and taxpayers pay a price.
Fortunately, there are programs in place that are helping to mitigate these barriers to entry to the benefit of consumers and taxpayers.
{mosads}In Auction 97, the most recent Federal Communications Commission (FCC) auction for the radiofrequency spectrum licenses necessary to support wireless networks, the FCC’s designated entity (DE) program worked successfully to increase participation in the bidding process. In fact, the DE program helped generate approximately $25 billion more in revenue than experts predicted prior to the record-breaking auction. A total of 37 small businesses and minority entrepreneurs participated in the auction, and 15 winning bidders will soon have the opportunity to bring new competition to the wireless market.
The FCC should act swiftly to grant these licenses.
When Congress amended the Communications Act in 1993 to authorize competitive bidding for spectrum licenses, it created the DE program to help reduce market-entry barriers faced by small businesses, rural telephone companies and businesses owned by minority groups and women.
Doyon, Limited, an Alaska Native Corporation owned by more than 19,000 Alaska Native shareholders, has participated in the DE program on a number of occasions, including in Auction 97. Without the DE program, Doyon would not be able to compete in the communications sector on a national level, and significant economic opportunities would be closed off to our shareholders. And Doyon’s past participation in the program shows its importance. In the late 2000s we built out the Chicago market under licenses won through the DE program in Auction 66. This build out brought additional competition and infrastructure to the local community.
Indeed, the DE program has been successful in accomplishing a number of important goals. It’s a good investment that pays multiple dividends for small businesses, consumers, taxpayers and the Treasury alike.
The communications sector has too often seen excessive concentration of licenses. The DE program broadens the dissemination of licenses by allowing new entry in the market, which creates a more competitive environment. This is good for innovation, good for equitable service deployment and good for consumers.
Further, barriers to debt and equity markets for small, minority- or women-owned businesses have historically led to a vast underrepresentation of these businesses in the communications market. By allowing businesses like ours to partner with larger carriers and bid at a discount, the DE program protects us from being priced out. When small, minority- or women-owned businesses are allowed to effectively participate in the bidding process, the communities we represent are able to benefit from their entrance into the communications market. This is good for underserved populations, who gain greater access to economic opportunities, in addition to expanded service in communities across the U.S.
Finally, spectrum auctions contribute significant revenues to the Federal Treasury. When only large incumbent carriers participate in bidding, those revenues are diminished. The DE program brings more participants to these auctions. More participation means more bids. More bids means increased prices, which means more revenue to the Treasury. This is good for the Federal budget and for taxpayers.
For example, industry analysts predicted that Auction 97 would attract approximately $18 million in bids. In fact, Auction 97 generated a record-breaking $43 billion in bids, revenues which flow directly to the Federal Treasury. Independent analysis by economists Peter Crampton and Pacharasut Sujarittanonta shows that this extra revenue was due to increased participation in the auction, much of it through the DE program.
The large incumbent carriers were still the largest winners in Auction 97. But smaller entities were also able to submit winning bids through strategic DE partnerships, as Doyon successfully did through a partnership with DISH Network called Northstar Wireless. Far from new or unprecedented, virtually all of the current large carriers have partnered with a DE in previous auctions, including some of the current critics of the DE program.
A competitive marketplace is essential for the communications sector to deliver new technologies, high-quality service, ubiquitous service deployment, innovative and low-cost offerings, and broad-based economic development opportunities, particularly to underrepresented populations.
The DE program helps maintain competition in the marketplace, and provides tangible benefits for communities who have long confronted too many closed doors. For Doyon it is a valuable program that helps us to strengthen our native way of life, and to protect and enhance our land and resources for this generation and the future.
Schutt is president and CEO of Doyon, Limited.