FTC Supports FCC Paging License Procedure Changes

The Federal Trade Commission said in comments it made public today that it supports "the efforts of the [Federal Communications Commission] to provide important information to potential licensees about the FCC telecommunications licensing process, an area that has been rife with consumer investment fraud for the better part of the past decade." Recent FTC and FCC efforts have put most FCC license "application mills" -- companies that file applications for licenses on behalf of individual consumers -- temporarily out of business, the FTC said. On the other hand, "many consumers who acquired licenses from the mills have been targeted in recent months by telemarketers who promise to help the consumers save and profit from their licenses through various schemes." Other telemarketers have solicited consumers to invest in general partnerships or limited liability companies that purportedly will bid on these licenses at auction and build telecommunications systems, but the telemarketers commonly use most of the money they raise to pay themselves, leaving little money for building the systems. Reducing these frauds depends on providing future consumer applicants with information about the licenses and FCC regulations, the FTC said.

"If the customers of application mills had understood from the start that FCC licenses alone were not marketable commodities, they would have been less likely to succumb to the telemarketers’ pitch about applying . . . in the first place," the FTC said, adding: "Similarly, if consumers who invested in build-out schemes had been aware of the restrictions on transferring the licenses involved and other FCC regulatory requirements, telemarketers would have found it considerably more difficult to deceive consumers into investing in those schemes."

In providing its comments, the FTC was responding to a second notice of proposed rulemaking (NPRM) published by the FCC in February concerning paging licenses, as well as a separate NPRM on FCC auctions. (The FTC also offered comments in March 1996 in response to the FCC’s first notice in the paging rulemaking process.)

In the comments released today, the FTC said it agreed with the FCC that the basic license application form (Form 600) should be modified to include clear and conspicuous dis closures about several items: FCC regulations prohibiting speculating and trafficking in wireless telecommunications licenses, construction requirements for the licenses, and the potential for fraud in the licensing process. In addition, the FTC said it supports requiring application pre parers to identify themselves on the application and certify that they have provided the applicants with information about pertinent FCC regulations. The FTC suggested that the information application preparers provide applicants be in the form of a standardized document prepared by the FCC. In addition, the FTC suggested that the FCC:

• require disclosures by entities that coordinate the frequencies for each paging license application -- in addition to the disclosures required on the application form, these coordinating entities should disclose to applicants for shared licenses the number of pre- existing co-channeled licenses for the relevant frequency; and
• require bidders at auction to disclose the ultimate intended owners of licenses -- that is, the names of the partners in general partnerships or shareholders in limited liability com panies -- and to certify that they have provided these named persons with information about FCC regulatory requirements for licenses issued through auction.

The Commission vote to file these comments with the FCC was 5-0. The Commission’s comments address the proposals only to the extent that they may deter consumer fraud, and not as a matter of communications regulation policy.

Copies of the FTC comments, as well as the March 1996 comments and news releases on the FTC’s cases targeting FCC license fraud, are available on the FTC’s web site at www.ftc.gov and also from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580: 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it happens, call the FTC’s NewsPhone at 202-326-2710.

(FTC Matter No. V970001)