AT&T's Stephenson: Favoring Sprint, T-Mobile in 600 MHz auction a 'big gamble'

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WASHINGTON--AT&T (NYSE:T) CEO Randall Stephenson said structuring the rules of the upcoming incentive auctions of 600 MHz broadcast TV spectrum to favor Sprint Nextel (NYSE:S) and T-Mobile US (NYSE:TMUS) would be a "big gamble."

Stephenson

Stephenson, speaking today at a panel convened by the Brookings Institution here on mobile technology and innovation, touched a great deal on the auctions, scheduled to start next year, and how they might be structured. His comments came against a backdrop of continued debate among the carriers and their allies over how much spectrum AT&T and Verizon Wireless (NYSE:VZ) should be allowed to pursue in the incentive auctions.

The AT&T chief said that policy makers at the FCC and elsewhere need to decide what it is they want to accomplish with the auctions, whether that is maximizing revenues, lowering prices for consumers or something else. He said the structure of the auctions should flow from that.

Smaller carriers have pushed for auction rules that would cap the amount of spectrum AT&T and Verizon can acquire, effectively ensuring that smaller carriers can get some of the spectrum that the wireless industry hopes will be made available through the auctions. AT&T and Verizon have argued that such rules would amount to picking winners and losers in the auction.

Stephenson said "arithmetically you are going to limit" the amount of revenue the auctions raise if regulators limit the spectrum available to AT&T and Verizon. He also said that "those that come in and bid the highest are those that are going to have the greatest need of the spectrum."

Stephenson noted that Sprint and T-Mobile did not participate in the 2008 auction of 700 MHz spectrum. AT&T and Verizon won the lion's share of 700 MHz licenses in that auction and are using those licenses to build their respective LTE networks. Given that history, Stephenson said tilting rules to favor Sprint and T-Mobile "feels like a big gamble."

The AT&T chief also noted that it is unclear how the market will be structured in 2014, given that Dish Network (NASDAQ:DISH) and SoftBank are both vying for control of Sprint and Clearwire (NASDAQ:CLWR).

Public policy that seeks to pick winners and losers "is chasing the wind," he said. "You don't know who the competitors are going to be and what they're going to look like."

Stephenson also touched on the concept of toll-free data, which he discussed in May. Such models allow content providers to pay for the data transmission cost of delivering their services to users, thus making it free for users to access specific apps, services and websites. Stephenson said AT&T already exposes network APIs that let developers do this.

Net neutrality advocates, including representatives from public interest groups, have said such plans will favor rich and large content companies over smaller ones and are therefore unfair. But Stephenson said he believes the plans will continue to progress.

"I would be surprised if this models does not evolve," Stephenson said. "I do not see any net neutrality issues," he said, adding that the model is open to any company or developer that wants to take advantage of it.

The Wall Street Journal recently reported ESPN is in talks for this kind of toll-free data offering.

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