A Fair Fight Or Dirty Pool?

Baghdad, IRAQ: Iraqi army soldiers share a moment with Iraqi children at a checkpoint in central Baghdad, 20 April 2007. Each Friday the war-torn capital is put under a day-long curfew as thousands of Muslim worshippers head to their respective mosques in order to perform the weekly Friday prayer. AFP PHOTO/ALI YUSSEF (Photo credit should read ALI YUSSEF/AFP/Getty Images)
Getty Images/Ali Yussef
Several small telecommunications companies are reportedly preparing court challenges to the government's $16.86 billion wireless communications auction, saying giants like AT&T Wireless used unfair tactics to outbid them.

That's according to the New York Times, which says that while the Federal Communications Commission set aside a number of licenses for small companies, those companies wound up making deals with telecommunications giants which bankrolled their bids to buy wireless airwave frequencies.

The losing bidders and the federal Small Business Administration say AT&T Wireless, Cingular Wireless, VoiceStream Wireless and Sprint PCS won more than 90 percent of the licenses that the federal government had set aside for small companies. A total of 422 licenses were up for grabs.

Auction critics charge that three of the wireless giants also benefited from hundreds of millions of dollars in government subsidies that were meant to promote competition by helping small entrepreneurs.

The December auction offered rights to an extremely limited and valuable resource needed by companies eager to serve more cellular-telephone customers and expand into wireless Internet service. The licenses allow winners to offer new services, such as wireless Web connections or two-way messaging on mobile phones.

Critics say the large wireless companies lobbied the Clinton administration to set aside licenses and discounts for small companies and then took advantage of the provisions.

"What these companies did was wrong, and they know it," said Paul Posner, the founder of a small mobile paging company in Texas.

Posner said he was outbid by another small company, which was allied with AT&T Wireless. He said he is preparing to challenge the auction with the FCC and in court, if necessary.

Officials at the big companies said their partnerships were structured to comply with FCC rules and that their smaller partners would manage the new operations independently.

"We feel our moves have been within the spirit and letter of the law," AT&T Wireless director of acquisitions Mark Bradner said.

Critics, however, said it didn't make sense for the big companies to finance the smaller ones and allow them to manage the new operations autonomously.

"If you think AT&T would hand money to another company to go into direct competition with it in the same market, then you're really stupid," said Posner.

AT&T Wireless and Cingular won no licenses in their own names but will gain commercial access to licenses in many major markets through their smaller bidding partners.

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