This is bigger than Enron. It's bigger than Worldcom. Only the victims this time are you and me.
You may (or may not) recall that last month, the FCC announced rules for its upcoming spectrum auctions that took a dim view of big operators "cooperating" with small bidders.
Turns out they weren't blowing smoke. There was a fire. A big one.
Bruce Kushnick of TeleTruth has uncovered $8 billion in auction fraud (PDF warning), in which the big players created phony "entrepreneurial" bidders who won spectrum and then handed it back.
This is fraud on a grand scale. It's classic, and blatant. It is breathtaking in its gall, mafia-like. Russian mafia-like.
TeleTruth has learned that all four of the country's major cellular operators -- Cingular, Verizon, Sprint and T-Mobile -- set up phony "entrepreneurial" companies to bid as small businesses and get spectrum at discount.
The purpose of the entrepreneurial cut-out was to spur competition. Through this fraud they prevented the competition from coming about.
TeleTruth has found, for instance, that a company called Edge Mobile was actually created by Cingular, and Vista Mobile by Verizon. Both bid as "Designated Entities" -- "very small business" groups which were to compete only against one another for spectrum. Both had the highest bids in service territories controlled by their parent, and then passed the spectrum along.
Fraud does not get much more blatant than this.
Two FCC commissioners -- Michael Copps and Jonathan Adelstein -- actually spoke against this recently. Unfortunately they are outvoted. The FCC is approving fraud in its own auction, on behalf of an oligopoly. Here is what Copps said:
"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."
Again, the government has refused to do anything about this, like take back the spectrum (or let it go out unlicensed, which would really create competition and growth).
After the jump is a list of these front companies, and who they were working for, created by TeleTruth:
- Alaska Native Wireless, L.L.C. (AT&T Wireless, now owned by Cingular)
- Salmon PCS, LLC (Cingular)
- Edge Mobile (Cingular)
- ABC Wireless, L.L.C. (AT&T Wireless, now owned by Cingular)
- Vista PCS (Verizon Wireless),
- Cook Inlet/VS GSM VII PCS (T-Mobile)
- SVC BidCo, L.P (Sprint)
- Wirefree Partners III (Sprint)
TeleTruth has filed its complaint with the Federal Communications Commission (FCC), the Department of Justice (DOJ), the Securities and Exchange Commission (SEC), and various committees in Congress.
Once this case goes forward, I expect to see some major cellular carrier executives in jail. The theft -- of spectrum, of money, of competition -- is bigger than what Enron committed.
And if the cellular carriers' executives think they are going to get away with this indefinitely, I think they have another think coming.
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