FCC auction to grant minority preferences

June 23, 1994|By New York Times News Service

WASHINGTON -- The Federal Communications Commission is close to completing a plan that would give small businesses, women and members of minority groups preferences worth JTC hundreds of millions of dollars in bidding on new licenses for wireless telephone and data communications.

The plan, to be adopted next week, would reserve nearly 1,000 radio licenses for small businesses in what commission officials call "entrepreneurs' blocks." In addition, companies owned by minorities or women would receive an array of bidding credits, or discounts, and flexible payment terms, which could shrink the cost of a wireless license by as much as half.

Agency officials say they will adopt the rules at a meeting Wednesday as part of the FCC's program to begin auctioning more than 2,000 licenses for a new generation of wireless "personal communication services" in December.

Each license authorizes a company to operate wireless services on a specific band of frequencies that cover a region somewhat larger than today's cellular telephone franchises.

Congress ordered the FCC to set up a system of preferences for small businesses, women and minorities when it passed legislation last year that authorized the auctions.

The new program would be one of the biggest affirmative-action programs ever created for companies owned by minorities and women, and it is almost certain to face legal challenges.

But the program has precedents. In 1990, the U.S. Supreme Court upheld the FCC's policy of granting preferences to minority-owned businesses applying for radio and television broadcasting licenses.

Late yesterday, the Clinton administration backed the FCC, which is an independent agency. The National Telecommunications and Information Administration, an arm of the Commerce Department, said it "strongly supports" the idea of two entrepreneurs' blocks and additional preferences for women or minorities.

As envisioned, the new systems will link devices like pocket-sized telephones, hand-held computers and portable fax machines. But the licenses themselves could easily cost tens of millions of dollars each, even at a discount, and experts estimate the cost of actually building a wireless network will be more than $100 million in a single metropolitan area.

Indeed, the commission defines a "small business" as a company with less than either $100 million or $125 million in annual revenues.

"That sounds like a lot of money, but it really isn't when you consider that a company may have to raise several hundred million dollars to get to that point," one official said.

The small companies will be entitled to "bidding credits" of 10 percent to 35 percent, which will allow a company to pay the government less than the amount they actually bid.

Small businesses owned by white males will receive the smallest bidding credits, but will also be allowed to pay on a 10-year installment plan.

Big companies such as the regional Bells or Time Warner Inc., which are intensely interested in securing licenses, will be allowed to bid on two blocks of very large licenses that cover broad regions. They can also bid on blocks of very small licenses, each covering an area about the size of a large metropolitan area.

Businesses owned by minority-group members or women will receive bigger credits, as well as installment financing and tax certificates that enable investors to defer their capital-gain taxes.

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