Irrational exuberance

Remember the old saying about too much of a good thing? It's certainly holding true in the latest chapter of the Federal Communications Commission's C block auction saga.

The FCC voted last week to let financially strapped holders of PCS spectrum licenses choose one of four payment options to get back on their feet (see story on page 6). Chairman Reed Hundt protested one of the options--letting the companies give back licenses they no longer want and buy those they want to keep--as putting a potential damper on competition.

The package stands, nevertheless, and it is aimed at averting a crisis that the FCC had a hand in creating--a market in which bidders can't pay for their winning licenses. But the FCC isn't solely responsible, and FCC commissioners are justifiably concerned that they changed the rules after the game was played.

The whole story started in May 1996 with what looked to be a pot of gold--$10 billion in bids from the auction. The money would help reduce the federal deficit and prove the wisdom of the Clinton administration's "New Democrat" ideals of privatizing former government domains.

The auction's aim was admirable: Let the little guys--albeit some backed by foreign billionaires--compete in a space formerly reserved for the major carriers. The FCC's euphoria, however, ended as a headlong plunge into what may become this administration's root of all evil: money-making at any cost. Greed set in. Then reality hit.

C blockers faced skeptical Wall Street backers and concern about their ventures' worth, primarily because the wireless market appeared saturated by projects already in the works.

Adding insult to injury is the reported failure of the FCC to file legal papers that give it the right to be the first creditor in line should a C block licensee go bankrupt. FCC officials claim they have their bases covered. We'll see.

The ordeal will become one of the legacies of the Reed Hundt era. The good news is that he and the FCC faced up to the issue and will not leave it for a successor to resolve. The irony comes in the resolution--letting the troubled C block licensees choose their punishment by giving them options to remedy their own, in some cases overzealous, bidding.