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AFFIRMATIVE ACTION LAW TO AFFECT AUCTION? : FCC POSTPONES FILING DEADLINE

WASHINGTON-A cloud of uncertainty continues to hang over the upcoming entrepreneur block auction for personal communications services licenses, this time due to the recent U.S. Supreme Court decision in the critical Adarand affirmative action case.

The Federal Communications Commission is trying to keep the Aug. 2 auction date in place. That means they have fewer than 45 days to change the rules, set a new short-form filing date, hear comments, do none of the above, or do all of the above.

“Nothing in the Adarand decision calls into question the concept of an entrepreneurs’ block or a reservation of licenses for small business bidding,” said FCC Chairman Reed Hundt. “The decision applies strict scrutiny to preferences based on race, but size is the criterion for entry into the entrepreneurs’ block,” Hundt said.

This is the second serious holdup for the “designated entity” auction of broadband spectrum by the FCC to small businesses, female- and minority-controlled companies. Although DE companies must qualify according to revenue, the FCC also offers race- and gender-based bidding credits, payment plans and other incentives, an idea mandated by Congress in 1993.

In the Adarand case, a white Colorado businessman challenged a federal program that grants bonuses to prime contractors who subcontract with minorities on transportation projects. The Supreme Court ruled the federal program automatically presumed that all minorities were disadvantaged, without applying a strict scrutiny standard.

Immediately after the Adarand decision was announced, the FCC postponed the June 15 short-form filing date for DE auction participants. A new filing date is expected to be announced this week.

The FCC is reviewing all administrative procedures to determine what it can do, what requires notice, how ground rules could be changed and other considerations, all taking Adarand into account.

The FCC preferences were contested in court earlier this year by a Mississippi rural telephone company that didn’t qualify as a DE contestant. The auction, tentatively set for June, was postponed during the lawsuit, causing insecurity for investors and some DE businesses. The lawsuit was dropped after the firm struck a deal with PCS PrimeCo L.P. in April; the FCC then set an Aug. 2 auction date.

Now comes the Adarand yellow flag. Hundt initially expressed no fear that the high court’s opinions would affect the DE auction. “I would be very surprised if the Supreme Court decision, based on the issues presented in that case, casts any doubt whatsoever on our upcoming auction or its rules,” he said a week before the justices’ opinions were announced.

That attitude puzzled DE advocate Micheal Walker, president of the National Paging and Personal Communications Association. “The FCC should have known racial- and gender-based preferences would be an issue. The FCC just didn’t want to tip off that they were concerned, but at whose expense?” Walker asked.

Hundt said the filing date was postponed to allow extra time because “any reasonable bidder or investor would want to read and digest the Adarand decision before committing to a financial structure.” In filing a short form, bidders outline their company’s control structure. Hundt said that bidders need a little time to tell the commission, in the wake of Adarand, which rules preserve their opportunity to participate, he said.

Bidding credits, payment plans and other incentives helped female-and minority-controlled firms win 11 of 30 regional advanced paging licenses last November. FCC spokesman David Fiske said the commission doesn’t believe those already-won licenses are at risk. Preferences failed to help DEs secure any of the 10 nationwide narrowband PCS permits sold last summer.

Auctions for wireless licenses such as those in the narrowband and broadband PCS category, have brought in more than $7 billion to the U.S. treasury.

Meanwhile, second-term Congressman Charles Canady, R-Fla., plans soon to introduce legislation-titled the Civil Rights Act of 1995-to prevent the federal government from granting preferences to any person based on race, color, ethnic origin or gender. “It is ironic that our civil rights laws, in trying to prevent discrimination, have actually encouraged and even enforced it with a pervasive regime of preferences and quotas,” said Canady, who chairs the House Judiciary subcommittee on the Constitution.

President Clinton, reacting to public opinion polls and to anti-affirmative stances by Republican presidential hopefuls like Senate Majority Leader Robert Dole, R-Kan., and Phil Gramm, R-Texas, is expected to complete a review of all federal affirmative action programs within weeks.

There is some sentiment in the political arena for using a needs test instead of criteria based on race and gender to shape policies for aiding disadvantaged individuals.

But Kweisi Mfume, D-Md., an influential member of the Congressional Black Caucus, has warned Clinton that he risks losing the black vote in his 1996 re-election bid if he retreats on affirmation action. He also threatened economic boycotts in states of GOP politicians who strike down affirmation action laws without taking African American concerns into consideration.

“If you think that racial minorities in this country, and in particular African Americans, are going to silently sit by and let 30 years of progress be taken away without a fight, then you are in for a very rude awakening,” said Mfume, in a remark directed at the Republican Party.

California Governor Pete Wilson, another GOP contender for the White House, earlier this month signed an executive order limiting affirmation action programs in a state rich in electoral votes (54). Other states are headed in the same direction.

Already this session, the Supreme Court declined to reinstate an affirmative action plan aimed at promoting African American firefighters in Birmingham, Ala., and let stand a lower-court ruling that shut down a black-only scholarship program at the University of Maryland.

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