----- Original Message -----
Sent: Friday, May 12, 2006 6:31 AM
Subject: [WISPA] Wireless Spectrum
Fraud
Teletruth News
Alert: May 11, 2006
Wireless Spectrum
Fraud by AT&T, Cingular (SBC & BellSouth), Verizon, T-Mobile and
Sprint? Are these "Very Small Businesses"?
Teletruth Estimates Over $8
Billion Was Pocketed through Deceptive Practices in Wireless Spectrum
Auctions. FCC, SEC and Other Violations Need
Investigation.
Upcoming (June 2006)
Wireless Broadband Auctions in Jeopardy:
Small Businesses
Screwed.Teletruth today filed an $8 billion complaint alleging that
Verizon, AT&T, Cingular (SBC, AT&T and BellSouth), T-Mobile, Sprint
and others rigged the FCC wireless auctions by creating false fronts to pose
as "very small businesses". This allowed these companies to secure valuable
wireless spectrum at discounted prices. This Complaint was filed with the
Federal Communications Commission (FCC), the Department of Justice (DOJ), the
Securities and Exchange Commission (SEC), and various committees in
Congress.
Deceptive Practices: Is it legal
for Americas "Very Large Businesses" to pose as Very Small Businesses"
to win wireless licenses to be used by the very large business? Data
from phone company annual reports:
- Salmon PCS LLC ---In November 2000,
Cingular formed Salmon to bid as a "very small business" for certain
1900 MHz band PCS licenses auctioned by the FCC.
- In November 2004, Cingular and Edge
Mobile Wireless formed Edge Mobile, (Edge) to bid as an "entrepreneur"
for certain 1900 MHz band PCS licenses auctioned by the FCC.
- AT&T Wirelesss financial
statements include other "variable interest entities" (read very small
business), similar to Salmon and Edge Mobile Wireless.
- Verizon Wireless: On February 15,
2005, the FCCs auction of broadband personal communications services
licenses ended and Verizon Wireless and Vista PCS were the highest bidders
for 63 licenses totaling approximately $697 million. --- Vista works for
Verizon.
Is it legal to keep the estimated $8
billion that was saved by posing as a "very small business"? Doesnt this harm
competition? Doesnt this defraud the government out of billions of dollars?
Why havent the FCC and DOJ stepped in to get the money
back?
Designated Entities or "Deceptive Entities"?
The FCC even has a name for these
companies: "Designated Entities".
Commissioner Adelstein on April 25, 2006
wrote:
"We missed a real
opportunity to shut down what almost everyone recognizes has the potential for
the largest abuse of our Designated Entity program: giant wireless
companies using false fronts to get spectrum on the
cheap."
The story is simple. The FCC auctions off
something called "Spectrum", which is used for wireless services, broadband
services, television, radio, etc. Also known as the "airwaves", the American
people own these airwaves and give licenses for the use of these airwaves. An
example: on June 29th, 2006, the FCC is about to have its
66th auction of spectrum for Advanced Wireless Services
(AWS).
"Today, the (FCC) adopted a
Public Notice that establishes procedures, minimum opening bids, and a reserve
price for the FCCs upcoming first auction of spectrum licenses for Advanced
Wireless Services (AWS-1). This auction, Auction No. 66, is scheduled to begin
June 29, 2006, and will include 1,122 AWS-1 licenses in the 1710-1755 MHz and
2110-2155 MHz bands."
This current spectrum auction is supposed
to yield between $9-$15 billion.
The FCC, in creating this auction, is
supposedly "promoting the rapid deployment of broadband, voice, and data
services to the public by new AWS licensees". And yet, the FCCs most recent
decision, April 25th, 2006, did not address or fix the fact that
these very large companies were able to rig the "small business" wireless
auctions.
FCC Commissioner Copps
wrote:
"News reports indicate
that, in prior auctions, entities with deep pockets helped themselves to
discounts they were never meant to enjoy. This unacceptable behavior threatens
the integrity of our auctions and, worse, it cheats consumers. It costs
taxpayers millions of dollars in foregone revenue. It also means that spectrum
goes to those most willing and able to manipulate the rules of the game,
rather than to the entities Congress actually intended to benefit
So, our job
is to deny wealthy companies or individuals any opportunity to misuse the DE
discount to outbid small carriers the very carriers the DE program is meant
to protect."
The phone companies will argue that the
are playing by the rules.
Teletruth believes this is fraud.
This is out-and-out-deception. Imagine that your state is building a road and
a percentage of contractors must be small businesses. However, on
investigation you see contractors larger than Trump and other very large
contractors have created shell companies to bid and get the contracts.
Wouldnt those contractors be put in jail?
And these companies know full-well they
are doing something wrong. Cingular writes:
"These
entities were
formed to enable individuals and businesses with limited assets and
revenues
to bid on licenses that were otherwise unavailable to
large entities."
And it directly impacts the authentic
small businesses. Verizon and Vista PCS (Verizons front group) were the
highest bidders in the 2005 auctions, meaning that Vista PCS won through its
ability to outbid every real small business that wanted those
licenses.
"On February 15, 2005, the
FCCs auction of broadband personal communications services licenses ended and
Verizon Wireless and Vista PCS, LLC were the highest bidders for 63 licenses
totaling approximately $697 million."
Verizon, AT&T et al are NOT very
small businesses and there is no law that can be cited that will make creating
dummy corporations ("false fronts") to win something that is designated for
small businesses by large corporations legal. And this problem has been
throughout the auction process with different groups acting as shills for the
large corporations.
Some of the Designated Entities with National Carriers
Relationships
(source: Council Tree,
2006)
- Alaska Native Wireless, L.L.C.
(AT&T Wireless)
- Salmon PCS, LLC (Cingular)
- Edge Mobile (Cingular)
- ABC Wireless, L.L.C. (AT&T
Wireless) Nature ---unclear
- Vista PCS (Verizon Wireless),
- Cook Inlet/VS GSM VII PCS (T-Mobile)*
- SVC BidCo, L.P (Sprint).
- Wirefree Partners III
(Sprint)
*We also note that T-Mobile is owned by
Deutche Telecom, the German telephone company.
Teletruth supports the original
principles of spectrum for entrepreneurs and does not argue that some of these
companies are legitimate concerns that have large funding partners. Nor do we
claim any knowledge that they, themselves are involved with some form of
tomfoolery. This is an industry-wide problem. The system has been abused.
While everyone knows and acknowledges that this is wrong, the regulators have
decided to ignore it.
How much money is involved? About
$8 billion.
Based on just two of the FCC's auctions
(35 and 58), Teletruth believes that the DE status of the large phone
companies saved them approximately $8 billion when comparing the discounted
prices vs the retail prices they would have paid had they not received the
discounts. Obviously, an investigation is needed to determine
the exact
amount.
Conclusions:
Our request for legal action is aimed at
ending this refusal to enforce the law. America has been robbed. Its treasury
has been robbed of billions of dollars, and its market has been robbed of
competition.
America is 16th in broadband
and needs innovation and competition. Instead, the system designed to bring
this needed entrepreneurial expertise, and protect the rights of Americas
innovators and small businesses, slaps them in the face. We are
16th in broadband because the large corporations that promised
deployments, and that we put our trust in, gamed the regulatory system in
multiple ways, and then failed to deliver. This is yet another view of the
deceptive practices and should be treated as such. The FCC, DOJ, SEC and
Congress should:
- Revoke the previous licenses that
Verizon, AT&T, Cingular (SBC, BellSouth), Sprint and T-Mobile received
under false pretenses.
- The companies should be taken to court
over this act of fraud and pay damages for their fraudulent acts.
- The SEC should examine the lack of
disclosure made by these companies about their relationships to fake-groups
set up to bid as "small businesses".
- Congress should commence an
investigation into the failure to enforce Section 257 of the Act and the
FCCs failure to protect the rights of small businesses.
- The wireless companies should be
divested from their wireline, broadband and long distance owners. It is
clear that these companies are too powerful and have used their wireline
services to cross-subsidize their own wireless businesses.
- Block the proposed AT&T-BellSouth
merger. These companies are already too big and cant be trusted. Previous
mergers have proven that these companies, when they get larger, do not
compete but reinforce their own market position.
- ALL of the original Bell
grandfathered-in cellular licenses and all other auctions need to be
investigated.
Contact: Bruce Kushnick, [EMAIL PROTECTED]
To read the Full Complaint: http://www.teletruth.org/docs/wirelesscomplaintfin.pdf
Teletruth is a nationwide,
independent customer alliance and was a member of the FCC Consumer
Advisory Committee (2003-2004). http://www.teletruth.org
(FOOTNOTES PROVIDED IN FULL PDF VERSION OF THE COMPLAINT)
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