WASHINGTON-The chief wireless regulator in the United States has been spreading the message of auctions as a key licensing tool in various overseas trips during the last year.
“You are struck when you travel that people are interested in the perspective of the U.S. government. It is not that they rubber stamp what we do,” but they are interested, said Thomas Sugrue, chief of the U.S. Federal Communications Commission’s Wireless Telecommunications Bureau.
During the last year, Sugrue has made three overseas trips all with an auction focus. In a recent interview with Global Wireless, Sugrue discussed his trips to Hong Kong in late September, Finland in August and the United Kingdom in November 1999.
Hong Kong’s hybrid approach
Most recently, Sugrue was in Hong Kong one week before the Hong Kong Telecommunications Authority (TA) reversed its position and suggested third-generation (3G) licenses in Hong Kong would be awarded by a hybrid method employing a merits-based first stage-or “beauty contest”-to decide who could participate in an auction.
Although the United States does not base participation in auctions on merit, Sugrue sees value in the Hong Kong approach.
“Having that first screen, from my point of view, is fine so long as it is not so high a screen that credible bidders are excluded,” said Sugrue.
Originally the TA had said it would use a beauty contest approach but changed its mind in a consultation paper released on 3 October.
“We believe that the proposed arrangement should achieve all of our policy objectives. Through the two-stage assessment and allocation process, we will ensure that the operator with the capability and best business case will be awarded a license,” said a spokesman for the TA’s Information Technology and Broadcasting Bureau.
While Sugrue saw no connection between his trip and the change in the TA’s position, he did say auctions were the top discussion topic.
“It was the number one issue on their minds. … They are clearly interested in the U.S. perspective on these things. … We think auctions are a sensible way to proceed. We have made some mistakes. … We think there are some misconceptions about auctions,” said Sugrue.
The United Kingdom’s billions
When Sugrue visited the United Kingdom a year ago, preparations for the country’s 3G auction, which raised US$32.7 billion, were well under way. The plans at that time allowed for companies to pay 50 percent down at the time of licensing and then pay the remaining 50 percent in installment payments.
After the debacle the United States experienced when it tried installment payments with the personal communications services (PCS) C-block license auction, Sugrue said he was interested in finding out why the United Kingdom would go that route.
The installment payment “was an issue we were interested in. One of the lessons we thought we had learned [was that installment payments can go awry]. In any event, they proceeded. They explained they were doing it differently,” said Sugrue.
In the end, all the bidders in the U.K. auction chose to pay when their licenses were issued. But British Telecommunications and Deutsche Telekom’s subsidiary One 2 One have filed a lawsuit, claiming Vodafone Group and Orange were given special treatment because they did not have to make their payments until four months after the auction. At the time, the U.K. government said Vodafone needed to divest its interest in Orange before either operator could receive its license, thus the four-month payment reprieve.
Finland’s no-auction
Sugrue said his trip to Finland-as part of a U.S. Congress fact-finding trip-was exciting since Finland is considered the vanguard of wireless use with penetration at 70 percent.
Again, auctions were a theme in his trip.
“We had a dialogue on the virtues of auctions, but in a sense it was academic, because they had already chosen a certain path,” said Sugrue, noting Finland chose a beauty contest to issue 3G licenses.
Finland, like Hong Kong, is a more youthful market than the United States, Sugrue said.
“What really struck me in Helsinki and Hong Kong [is that] there really is a youthful market in those two cities … [This] suggests that there is an untapped market or an underdeveloped market here,” said Sugrue.
Teen-age mobile use in the United States comprises only a small percentage of the country’s overall wireless use.
U.S. re-auction
In U.S. auction news, Sugrue recently told reporters he fully expects the scheduled re-auction of PCS licenses to go forward as planned on 12 December.
There had been some question about whether the auction of 422 licenses-90 of which were reclaimed from bankrupt NextWave Telecom-would go forward as planned after a U.S. federal appeals court decision may cause the U.S. Supreme Court to consider the case.
One FCC commissioner has urged the auction to be delayed until the legal uncertainties have been resolved. In addition, NextWave is focusing its attention on potential legislation that would either delay the re-auction or prevent the FCC from taking back the NextWave licenses.
