Remember these names: Tom Wheeler; Mignon Clyburn, Jessica Rosenworcel. They are, respectively, the Chairman and the two Democratic commissioners sitting on the five-member Federal Communications Commission (FCC). FCC-regulated media and telecom drive everything that has value for us, including civic engagement, our educational system, our health care, and our job opportunities. Congress made sure that one of the FCC’s highest priorities is to promote minority ownership of the tools of communications. In 1993, it commanded the FCC to administer the radiofrequency spectrum — the invisible resource that is used for broadcasting, cellular phones, and a host of other purposes — by “disseminating licenses among a wide variety of applicants, including small businesses, rural telephone companies, and businesses owned by members of minority…
Remember these names: Tom Wheeler; Mignon Clyburn, Jessica Rosenworcel.
They are, respectively, the Chairman and the two Democratic commissioners sitting on the five-member Federal Communications Commission (FCC).
FCC-regulated media and telecom drive everything that has value for us, including civic engagement, our educational system, our health care, and our job opportunities.
Congress made sure that one of the FCC’s highest priorities is to promote minority ownership of the tools of communications. In 1993, it commanded the FCC to administer the radiofrequency spectrum — the invisible resource that is used for broadcasting, cellular phones, and a host of other purposes — by “disseminating licenses among a wide variety of applicants, including small businesses, rural telephone companies, and businesses owned by members of minority groups and women.” Legislation doesn’t get more direct that that.
There are two routes to spectrum ownership.
One of them is participation in FCC-administered auctions of spectrum through the Designated Entity (“DE”) program, through which the FCC offers discounts called “bidding credits” to small new entrants.
The other route to spectrum ownership is to buy spectrum directly from incumbent carriers through “secondary market transactions”, at market prices and without FCC involvement.
Supporters of entrepreneurship for people of color should approach these opportunities with three goals in mind:
First, support the DE program for small, minority and women owned businesses.
Second discourage transactions that game the system at the expense of legitimate bidders.
And third encourage telecom companies to structure secondary market spectrum sales to experienced, well-qualified entrepreneurs of color.
Recently, I was surprised and dismayed to read a commentary by a former senior FCC staff member, Adonis Hoffman, that got both of these points wrong. Mr. Hoffman’s commentary was published in the influential industry trade paper Multichannel News. Although it has a clever title, “Don’t Hate the Players, Hate the Game,” it managed to love the wrong players and hate the wrong game.
Hoffman had nothing but praise for the gargantuan Dish Network and its recent gaming of the DE program to deprive taxpayers of over $3 billion in “small business” bidding credits. How did Dish’s scheme work?
As the Communications Workers of America (CWA) and the NAACP recently broke it down to the FCC, Dish “incorporated two designated entities”, maintained an 85 percent interest in both, then “entered into joint bidding arrangements with the companies, triple bidding” in the lucrative AWS-3 spectrum auction “for almost 4,000 licenses until Dish dropped out and eventually one of the two designated entity companies won the bid”, thereby receiving $3.25 billion in taxpayer subsidies. Hoffman chalked this up to bad auction design. Some have called it a rip off.
Hoffman’s piece also detoured into a surprise attack on a well-established minority owned Grain Management. When did “Acquiring Wealth While Black” become a bad thing?
David Grain is a prime example of a responsible Black entrepreneur. His company hires and mentors people of color, uses minority contractors, supports African American community institutions. And Grain is in the game for the long haul, creating a company that will provide real competition and innovation for the benefit of all consumers.
So what is Hoffman’s beef? Here is the “411”: in 2012, Grain Management completed the acquisition of $287 million in spectrum from Verizon and AT&T in a secondary market transaction that the Multicultural Media, Telecom and Internet Council (MMTC) and the National Urban League brokered. The deal had nothing to do with the DE rules. It had nothing to do with auctions.
Instead, it was done directly between the buyer and the sellers without the need for government involvement. It was a tour de force — the largest minority spectrum deal in history. And contrary to Hoffman’s suggestion, there was no discount at all. Grain paid the negotiated market price for the spectrum in a deal that was structured by the parties, not government.
Nor is there anything wrong with the fact that Grain hasn’t done the impossible and built out facilities before his company attains the necessary scale. Non-minority companies, including those with plenty of scale, acquire spectrum all the time and build it out over time. No one criticizes those companies for being “wealthy, wellconnected White investors.”
How dare Mr. Hoffman hate on the largest minority spectrum deal in American history? If minorities can’t do private market asset acquisitions, what CAN we do?
There are hundreds of David Grains who have put in decades on Wall Street or in large corporations. They’re ready, willing and able to turn small businesses into what Black America urgently needs: large businesses that will drive dollars and jobs into our communities that so urgently need them.
The FCC certainly can help. Last month, through the initiative of Chairman Wheeler, Commissioner Clyburn and Commissioner Rosenworcel, the FCC adopted reforms to the DE program that will make it possible for minority and women bidders to raise capital, bid effectively, and win spectrum.
Going forward, the FCC should also encourage carriers to do more secondary market transactions with experienced minority entrepreneurs.
African American leaders must stand up and defend the DE program and its reforms, and push hard for more secondary market transactions. We need to use all available business, advocacy and regulatory tools at our disposal to advance opportunities for African American entrepreneurship.
Why should we do this? Because our people are the telecom industry’s biggest customers. We’re innovative. And when we introduce competition, we help keep prices low. When we get a chance to compete with the large carriers, everyone wins.
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