Tales of the Sausage Factory

This Is Ready From Day 1?

In his most recent emphatic response to the financial crisis that cannot in any way be blamed on the former Chairman of the Senate Commerce Committee (because really, it was those bozos over at Banking, Housing and Urban Affairs and possibly the folks over at the Judiciary’s Subcommittee on Antitrust), former Deregulator turned Regulatory Hawk John McCain told a cheering crowd of supporters that if he were President he would fire SEC Chairman Christopher Cox.

“The chairman of the SEC serves at the appointment of the president and in my view has betrayed the public’s trust,” McCain said. “If I were president today, I would fire him.”

Firey, determined, definitely a stern rebuke to the Bush Administration and its lackeys who — although confirmed by McCain and the rest of the Republican Senate back in 2005 despite nasty bad bad partisan allegations that Cox had been involved in some shady investment schemes — certainly have nothing to do with McCain the Reformer!

Except, of course, that the Chairman of the SEC does not serve at the pleasure of the President and cannot be “fired,” only impeached by Congress. The President can “demote” Cox by redesignating someone else on the Commission as Chairman — which would probably prompt a Chair to resign before letting that happen. But still, saying you would fire someone you have no authority to fire? This is ready from Day 1?

I suppose I could give McCain the benefit of the doubt and assume he knows the actual law, and that he was just shorthanding “I can’t actually fire him, but I would certainly embarrass him and harass him out of a job faster than a Wasilla Librarian who refused to censor books!” To the more dramatic “I would fire him and then be all embarrassed when I was told I can’t actually do that.” But either way, it’s a pretty stupid response when McCain spent all his time as Chair of the Commerce Committee perfectly happy with the way the SEC regulated the financial sector. (I know, I know, wrong committee, not my fault . . . .)

Stay tuned . . . .

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Tales of the Sausage Factory

It's Nice When the FCC Listens Part II — The Cyren Call Investigation Is Out.

When it rains, it positively pours. The FCC just released its Inspector General Report on whether Cyren Call screwed up the D Block. As readers may recall, I and my friends from the Public Interest Spectrum Coalition (PISC) sent a letter to the FCC as soon as the auction ended, asking the FCC to investigate the allegations over whether Cyren Call scared away D Block bidders. To his credit, Martin referred our letter to the FCC’s inspector general. The IG did a quick and thorough job, which you can read here. I shall add that it always gives one pause to find oneself as a subject heading in an IG report.

Generally, I’m satisfied with the report, which confirms my own suppositions after the anticollusion rules lifted and Cyren Call started yapping. Critically:

1) The meetings took place;

2) They were understood by all participants to be business negotiations, not “take it or leave it” demands;

3) The lease payment itself was not a deal breaker, but the potential bidders interviewed said that so many questions about potential financial liability and business model remained — aggravated in part by the uncertain role of Cyren Call — that they opted to stay away (or, as the IG concludes “this was just one drop in many different buckets”);

4) No FCC rules were broken and no one acted in bad faith, therefore there is no need for a referral for any criminal investigation.

Personal reflections below . . . .

Read More »

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Tales of the Sausage Factory

Quick 700 MHz Updates

First, we at PISC have sent a letter to the FCC asking the FCC to sever the D Block issues, announce the winners of the rest of the auction, and thoroughly investigate the allegations around Cyren Call and its pre-auction discussion with Frontline. (Martin has apparently already circulated something that severs D Block, so they can announce results as soon as the other Commissioners vote and the wireless bureau finishes the necessary housekeeping.)

Perhaps more importantly for the long run, we ask that the FCC take a hard look at whether to try to fix the public/private partnership or possibly do something else. The FCC has a lot of options here. And with the auction clearing over $19 Billion and the statutory requirement to start an auction before January 28, 2008 fulfilled, the money pressure and time pressure are off. We have time to have a public process and do it right.

Second, here is Kevin Martin’s official statement explaining why the auction was a huge success (and, by implication, why he did a bang up job getting this done). Martin, sensitive to the grumblings from folks who say that different rules could have gotten more revenue, included this handy chart showing that, on a pure revenue basis, the 700 MHz auction is the most successful FCC auction ever.

(In the reading the tea leaves department, I note that the chart subtracts out the D Block bid. And indication the FCC won’t just pass off the D Block to the lone low bidder? Maybe, but no surprise if that turns out to be the case.)

You can find Tate’s statement here. I have not seen official statements from any of the other offices.

Stay tuned . . . .

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Tales of the Sausage Factory

That's It! The 700 MHz Auction Is Ovah ! On to Tasting And Judgment . . . .

At long last, the FCC went three rounds without any new bids and declared Auction 73 (better known as Battle 700 MHz) closed. You can see the final provisional winning bids on the FCC’s Auction 73 page here.

Of course, we are all waiting to see who won what licenses, particularly C Block. But we have some preliminaries to go through first. Most importantly, the FCC has to make a decision on whether to sever the D Block from the Auction so that it can investigate what happened, especially the allegations around Cyren Call and Morgan O’Brien.

Even with the information available, Auction 73 has clearly succeeded on a number of key fronts. Unsurprisingly, I am inclined to credit anonymous bidding with the enormous surge in value for the licenses. Even if incumbents ended up walking away with the lion’s share of the licenses, at least they paid market value for a change (as opposed to the AWs auction, where they picked them up dirt cheap). I also note that at the end of the day, the FCC has only 8 unclaimed licenses (compared with 35 for AWS). As Greg Rose observed previously on his blog, there is good reason to believe we saw a lot of new people bidding.

It remains to be seen, however, whether the auction brought in new competitors or if, as the conventional wisdom predicted, AT&T and Verizon walked off with the big prizes. In particular, we all wait with baited breath on who won C Block.

Finally, two points on D Block. First, even if the experiment failed, that did not make it a dumb move. Babe Ruth used to lead the league in home runs and strike outs, because you can’t hit home runs unless you swing at a lot of pitches. With the FCC trying to satisfy the mandate of Congress to promote a national interoperable public safety network, but with insufficient spectrum allocated and with insufficient funds to build it. So the Commission tried to think outside the box and took a chance. turns out — for reasons still unknown — it did not work out.

Always punish innovators if things don’t go exactly right and you run out of innovators damn quick. Anonymous bidding was also an innovation. So is the open device condition. Before folks rush out to buy stink bombs to lob at Martin and the other Commissioners over D Block, consider if we want the next FCC reduced to such political timidity that we always get the same auction rules again and again and again, because the price of innovating is too high.

Second point: the FCC has a silver lining here. With the auction over, the FCC has fulfilled its statutory obligation to hold an auction commencing by January 28. Not only can the FCC take the time it needs to consider what to do, it can also consider other solutions besides trying to fix up D Block or even auctioning it off the highest bidder. That could include non-exclusive licenses, real time auctions, or even an unlicensed commons — if that would best serve the public interest.

I’m not saying what the best solution for D Block is, because we don’t know enough yet. It will depend on a lot of factors, such as who won the other licenses and how much stomach the FCC has to innovate. But I’m hoping that the FCC and others, when assessing Auction 73, will consider the successes as well as the D Block failure. Otherwise, they will vote to do the politically safest thing. Not a result I’d like to see.

stay tuned . . . .

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