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Spectrum bids suspect
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May 1, 1997: 9:13 p.m. ET
Justice Dept. conducts probe to determine if auctions were rigged
From Correspondent Steve Young
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NEW YORK (CNNfn) - Recent government auctions of wireless personal communications licenses yielded far less money than Washington originally expected.
The results piqued the interest of the Justice Department which is now looking into whether the bidders may have rigged the auction.
The Justice Department said the investigation was launched to ensure that the companies bidding for wireless licenses did not engage in collusion.
The government wants to know if the bidders knew which licenses each company wanted and purposefully kept away from each other's key targets in order to lower a license's price.
Federal Communications Commission Chairman Reed Hundt, when questioned by reporters about the investigation, declined to address the issue.
"I know what you're talking about, but I can't comment to you about it. I simply cannot comment...," he said.
Scott Cleland, telecommunications analyst with Schwab's Washington Research Group, said it is possible that the government outwitted itself.
"They tried to figure out rules to the auction to create the most amount of money. There's a lot of different ways to conduct auctions and each way has some vulnerabilities.
"I think what we saw is that there were some irregularities, but not too many in the scope of things," he said.
Justice has asked Peter Cramton, a professor of economics at the University of Maryland, for his analysis of the bidding process.
Cramton, who helped the FCC design the auction format, said for the most part they have been very successful. (135K WAV) or (135K AIFF)
Congress is already offering bills to change the auction process. Meanwhile, the FCC blames Congress for rushing the process to generate funds to help cut the current budget deficit.
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