TPS Utilicom says it paid far more than necessary for wireless licenses in a recent spectrum auction that was supposed to be weighted toward small bidders, because of deceptive business practices by AT&T Wireless.
The carrier has sued AT&T Wireless and Alaska Native Wireless in California Superior Court in Los Angeles County, claiming AT&T Wireless set up Alaska Native as a "front" company, allowing it to win more licenses in the auction.
The rules of Auction 35 permitted small businesses to bid on any license on the block while large companies could only bid on certain spectrum. Alaska Native Wireless reported total assets of $1,000 and no revenue during the past two years, so it was able to bid on all of the licenses. And, even though it had no revenue, the company put down the maximum upfront payment of $238 million, and bid $2.9 billion in the auction.
TPS Utilicom contends that AT&T Wireless fronted Alaska Native $2.6 billion and owns nearly 80 percent of the company. The Federal Communications Commission didnt set limits to how much money a large company can invest in a small business, but did say small-business bidders cannot be controlled by a larger company.
"Were questioning AT&T because they took markets where we wanted to serve Native Americans," said Raymond Quianzon, counsel to TPS Utilicom with the firm Fletcher, Heald & Hildreth. TPS Utilicom is a Native American-owned company that entered the auction hoping to win every market in New York that includes tribal lands. Wireless operators seldom build networks on reservations and in New York only 40 percent of residents on tribal lands have landline phone service, Quianzon said.
Conrad Bagne, one of three managing directors of Alaska Native Wireless called the lawsuit "frivolous, without merit and clearly filed for harassment purposes."
TPS Utilicom won four licenses during the auction, two of which cover tribal lands. Alaska Native Wireless won 44 licenses.
As Alaska Native Wireless bid in the auction, TPS Utilicom believes it increased the price of licenses reserved only for small businesses by more than $650 million.
TPS Utilicom has already filed a complaint asking the FCC to examine the relationship between Alaska Native Wireless and AT&T Wireless. "The FCC is diligently scrutinizing the Alaska application," Quianzon said.
AT&T Wireless contends that it has done no wrong. "Alaska Native Wireless is an entity fully and properly qualified under the FCCs designated entity requirements," an AT&T Wireless spokesman said. "AT&T Wireless is confident the lawsuit filed by TPS Utilicom is completely without merit." He confirmed that AT&T Wireless is an investor in Alaska Native Wireless.
In other developments surrounding Auction 35, many industry experts believe that the FCC, NextWave Communications and some of the large license winners are close to negotiating a settlement. NextWave originally bought licenses in 1996 and has been embroiled in a legal battle with the FCC since then over the right to own them. As part of a settlement, NextWave would return the licenses for a payment and the FCC would award the licenses to the companies that won them in Auction 35, which ended in January.
Reports have surfaced suggesting that Verizon Wireless has offered a payment plan to the FCC as part of the proposed settlement. Verizon may have also asked the FCC to return its down payment plus interest, according to the reports.
The FCC told bidders prior to the auction that it would not pay interest in the event that the agency is required to return the down payments. License winners are angry that they havent received their licenses and the FCC has held on to their down payments since the auction closed. In Verizons case, the down payment amounts to nearly $2 billion.