Posted on August 7, 2014

FCC’s Friends and Family Plan

Holman Jenkins, Wall Street Journal, August 5, 2014

Racial spoils are making a comeback at the Federal Communications Commission after being put mostly to rest in an important 2006 reform.

The latest sign is a quiet, nonpublic vote by Chairman Tom Wheeler and his two fellow Democrats to approve a waiver for minority entrepreneur David Grain, allowing him a 25% discount in this fall’s spectrum auction–a nice windfall.

Mr. Grain already owns several spectrum licenses acquired as part of a swap between AT&T and Verizon–which he leases back to AT&T and Verizon. This alone should have made him ineligible for bidding credits. Credits aren’t supposed to be available to those who are looking merely to flip spectrum for easy profits.

And this is just the latest action in favor of Mr. Grain’s private-equity fund, Grain Management. Last year Acting Chairwoman Mignon Clyburn, in the five months before Mr. Wheeler was confirmed, approved a convoluted bit of regulatory arbitrage in which AT&T and Verizon bought and swapped spectrum among themselves, then sold a portion to Mr. Grain so he could lease it back to them.

Also involved was the Minority Media and Telecommunications Council, a civil-rights lobby group that publicly took credit for promoting Mr. Grain to Verizon (Verizon is a charitable funder of MMTC).

Still left open is what happens in November if Mr. Grain wins more airwaves in the upcoming auction. Nobody anymore expects a minority- or woman-owned small business to raise the billions it would take to battle the big boys in today’s now-mature wireless scrum. Turns out Mr. Wheeler has a solution here too–a separate rule-making that would allow Mr. Grain to turn around and lease any newly acquired airwaves to the big boys as well.

If that weren’t enough, Mr. Wheeler has even taken under advisement a white paper by the MMTC, supported by other minority lobby groups, arguing that the minimum handout to minority bidders should be boosted to 40%.


And the MMTC? It has been helping to rally traditional civil rights-related organizations (several of which get big donations from AT&T and Verizon) to back the FCC chief in his holy war with left-wing groups like Free Press and smaller minority organizations like the National Hispanic Media Coalition.

Apparently one sacrifice the country is going to have to make to save the Internet from regulatory overkill is the 2006 reforms to the minority spectrum bidding regime. Everything the rules were meant to prevent–unjust, overnight enrichment of politically favored bidders–will again become the purpose of the rules.

From the moment Bloomberg News reported the David Grain waiver two weeks ago, the focus has been on Mr. Grain’s political giving. He was a big Obama bundler and lately has been generous to South Carolina Rep. James Clyburn, whose daughter is the FCC’s Ms. Clyburn. {snip}

In any case, he may be a fine person (everybody says so), but his windfall is coming straight from the taxpayer’s pocket. {snip}