The FCC scored another key legal victory yesterday at the Third Circuit Court of Appeals, which affirmed updates of the FCC’s competitive bidding rules that prohibited shared bidding strategies and multiple auction applications by parties with common controlling interests and prescribed a first-ever bidding cap of $150 million for small business designated entities (DEs) that participated in the recently-concluded incentive auction.

Enacted by a 3-2 margin in July 2015, the Report and Order in the FCC’s competitive bidding proceeding responded, in part, to the actions of DISH Network in the 2014-2015 Advanced Wireless Service (AWS)-3 auction, during which two DEs affiliated with DISH received $3.25 billion in DE credits on $13 billion in gross winning bids. AT&T, Verizon Wireless and other AWS-3 auction participants complained to the FCC that coordinated bidding among DISH and its affiliated DEs compromised the integrity of the auction by inflating bid prices and creating the impression that there was more competition for certain licenses than was actually the case. The FCC ultimately denied the bid credits, thereby requiring the DEs in question to pay the full price of their gross winning bids.

Despite acknowledging the complaints made to the FCC about the actions of DISH and its affiliated DEs during the AWS-3 auction, Council Tree Investors (CTI) appealed the competitive bidding rule revisions to the Third Circuit. Arguing that the FCC provided no evidence of an overall pattern that the DE designation was being abused, CTI told the court that the revised rules ignored the FCC’s statutory obligation to promote competition and avoid excessive concentration of licenses. 

CTI further charged that the bid cap was set in an arbitrary and capricious manner as the FCC had provided no data in support of that cap.

Rejecting these arguments, the Third Circuit panel found that the FCC had “reviewed data from past auctions before concluding that the cap would not significantly impair the ability of DEs (in the aggregate) to compete in auctions.” Because the FCC had also specified that the bidding cap was to be paired “with regulations that increased flexibility for DEs seeking to obtain capital,” the court thus proclaimed that the FCC “not only set forth a policy that is likely to allow continued participation by DEs, but also rationally explained why it expected no significant loss of DE participation.” Although the FCC offered no comment, a Council Tree spokesman confirmed: “we are reviewing the opinion and considering our options.”