Home » Uncategorized » The Federal Communications Commission Must Reform The Designated Entity Program

By Rosa Mendoza, HTTP Executive Director

Where are the Latino Geeks? Not in Silicon Valley, that we know. There is an unacceptably low percentage of Latino innovators and influencers in Silicon Valley; not to mention the technology industry as a whole. Many factors contribute to this unacceptable dearth in participation but one example, that is readily curable, is the low rate at which minority-owned businesses, especially those that are owned by Latinos, are able to secure broadcast spectrum licenses to participate as owners in one of the major segments of our economy – communications. Without immediate FCC rule changes to the congressionally mandated Designated Entity (DE) program, opportunities for diverse entry and spectrum ownership, by Latinos will continue to be dismal and mismatched to our level of consumer engagement as mobile users.

Spectrum auctions and licensing are both very important topics that impact minority- and women-owned businesses. Unfortunately, these issues do not get nearly enough news coverage and, consequently, many Latinos do not understand the importance of these areas in generating wealth in our communities.

What is spectrum? Wireless telecommunications and LAN signals are broadcast over specific electromagnetic wave frequency ranges, typically anywhere from 300-3,000 MHz, depending on the application. Depending on the material, higher frequency waves tend to be able to penetrate better than lower frequencies, especially in urban footprints where it is extremely important to have higher frequency blocks of spectrum. As expected, lower frequency wavelengths carry better over long distances, without interruption, and these tend to work well in rural areas.

Since 1994, the Federal Communications Commission (FCC) has regulated and assigned licenses to companies from subdivided ranges of these signals. Over the years, the FCC also assigns frequencies through a competitive bidding – or auction – process. Winning at auction requires a lot of capital and it is no surprise that large, entrenched telecommunications companies have had the ability, along with necessary capital, to dominate spectrum auctions. Congress anticipated this problem and sought to include safeguards to prevent the FCC and large companies from excluding small and diverse businesses, potentially leading to an overconcentration of broadcast licenses among larger incumbents. In fact, Congress mandated that the FCC take steps to ensure the participation of small businesses, minority-and women-owned businesses, and rural telephone companies, collectively known as DEs. Early on in its implementation, the DE rules facilitated meaningful small business participation, particularly for new entrants. Today, the current DE rules have created a stalemate in minority spectrum ownership, and reversed the intent of the congressional mandate by making it, in fact, harder for small businesses to participate as spectrum bidders.

The largest regulatory barriers standing in the way of new DE entry and diverse competition are outdated rules and financing expectations that do not account for the marketplace in which mobile and wireless services have grown. One such rule is the Attributable Material Relationship (AMR) rule that without elimination will limit the ability of DEs to engage in creative, retail strategies such as leasing, wholesaling and other resale arrangements that could, in fact, generate more long-term sustainability for qualified entities.

Almost a month ago, Tom Wheeler, the FCC Chair, circulated a Notice for Proposed Rulemaking to explore new options, and perhaps revise rules, for the DE program to his fellow Commissioners. Today, that item was publicly distributed for comment, making this a historic FCC action.

The Hispanic Technology and Telecommunications Partnership (HTTP) looks forward to the FCC gathering timely and substantive input that will foster more meaningful participation of Latino small businesses and entrepreneurs as owners of commercial wireless spectrum.  As more Latinos become wireless-only households, the ability to be owners and not just producers in the telecom sector is crucial. Between 1997 and 2002, Latino-owned businesses saw an 11% increase in employment despite national declines. To put that into practical terms, the Department of Commerce’s Minority Business Development Agency (MBDA) estimated in a 2010 report that it amounted to approximately 160,000 jobs that would have been lost without the growth of minority businesses.

As we move towards a digital culture leveraging the power of wireless technologies, the realization of minority ownership should be an attainable goal and a practical reality for Latino communities. As our communities and citizens strive for greater engagement and increased economic power, the burgeoning media and telecommunications sectors that now comprise more than one-sixth of the national economy should not be hands-off to Latino small and medium-sized business owners, suppliers and entrepreneurs.

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