U.S. Probes Alleged Fixing of Bids for FCC Licenses

WASHINGTON — In another blow to one of the federal government’s hottest methods of raising money, the U.S. Justice Department said Wednesday that it is looking into allegations of bid-rigging at airwave license auctions held by the Federal Communications Commission.

The department’s probe was apparently triggered when auction participant High Plains Wireless, a small Amarillo, Texas-based company, complained to the FCC in November that a rival bidder used codes to communicate its bidding strategy to others.

The probe focuses on a series of three auctions of 1,479 wireless licenses that ended in January and raised $2.5 billion for the federal treasury. The Justice Department has contacted as many as 50 companies, including telecommunications giant AT&T; Corp., industry officials said.

Gina Talamona, a spokeswoman for the Justice Department, said authorities were “looking into the possibility of anticompetitive conduct by bidders in connection with the FCC’s auction of spectrum by PCS.”

Personal communications service, or PCS, is a new kind of wireless phone technology that will compete with traditional cellular phones.

The inquiry is said to focus on whether some bidders divided markets to avoid competing on certain licenses and whether companies inserted numbers into their bids to alert others about which licenses they wanted.

BellSouth Corp., Sprint Corp. and NextWave Communications were also among the 121 successful bidders--about a third of which have never been in the wireless business before. Sprint was the top bidder, pledging $544 million for 160 licenses. AT&T; was the next-highest bidder, with $407 million for 222 licenses.

“We have received a request for information from the Justice Department,” said AT&T; spokesman Jim McGann. “A civil investigation demand does not signal whether the recipient is the target of an investigation . . . [but] we are going to cooperate fully.”

Spokesmen for BellSouth and NextWave said they have not received any inquiries from the Justice Department. A Sprint spokesman did not return calls from The Times.

The FCC is in the process of issuing licenses won in the January auctions. The agency was given the power to hold the auctions in 1993 and held its first sale in 1994. Since then, bidding for the right to offer wireless services has been so spirited and so lucrative--raising more than $20 billion--that agency Chairman Reed E. Hundt has joked that the FCC’s acronym should stand for “Federal Cash Cow.”

But the auctions have recently been plagued by a series of controversies that have marred their apparent financial success.

On Wednesday, Sen. Bob Kerrey (D-Neb.) introduced a bill directing the FCC to set minimum bids in order to avert a repeat of what he termed a “giveaway” auction last week when some FCC licenses were auctioned for just $1.

But at least one PCS license recipient, Pocket Communications, has filed for bankruptcy protection. Several others have been unable to arrange financing to pay for their licenses.

Those developments prompted the FCC last month to announce that is was suspending collection of payments on about $10 billion worth of wireless licenses in order to determine whether the Treasury Department or some other government agency should take over collection.

It is not known whether the alleged bid-rigging being probed by the Justice Department was aimed at holding down license bids from their previously lofty levels.

But in filings with the FCC, High Plains Wireless alleged that in bidding for PCS licenses covering Amarillo and Lubbock, Texas, rival Mercury PCS of Jackson, Miss., began “placing trailers in its bid amounts that communicated its bidding strategy to High Plains.” High Plains alleged Mercury used the last three digits of its bids to indicate what PCS license it was bidding on, in apparent violation of bidding rules.

Lawyers for Mercury said High Plains’ allegations are unfounded and said they were made in retaliation for a 1996 shareholder dispute.

“The High Plains’ theory conveniently and improperly overlooks the fact that collusion, by definition, involves two or more parties working together to achieve some improper objective,” Mercury said in papers filed with the FCC. “In the Emergency Petition, only Mercury’s conduct is alleged to be in violation of the rules.”