T-Mobile US (NYSE:TMUS) is buying lower 700 MHz A Bock spectrum from Verizon Wireless (NYSE:VZ) for $2.36 billion, but argues that it still needs more low-band spectrum to compete more effectively with Verizon and AT&T Mobility (NYSE:T).
In a company blog post, Kathleen Ham, T-Mobile's vice president of federal regulatory affairs, wrote that the deal "will provide us with a good base of low-band spectrum, but it does not eliminate our need to continue to add to our portfolio." The block of spectrum T-Mobile is buying form Verizon is small, essentially a 5x5 MHz block.
Ham added: "Even though interference and other problems previously associated with the A-Block are rapidly diminishing, thanks in part to an interoperability deal brokered by the FCC with AT&T and Dish, not all of the spectrum will be immediately usable."
T-Mobile has said the transactions, combined with its existing A Block holdings in the Boston metro area, will result in T-Mobile having low-band spectrum in nine of the top 10 and 21 of the top 30 markets across the United States. Combined with its existing Boston A Block holdings, T-Mobile has said it will have low-band spectrum covering approximately 158 million POPs, including Atlanta, Dallas, Detroit, Houston, Los Angeles, New York City, Philadelphia and Washington, D.C. T-Mobile said the spectrum covers 70 percent of its existing customer base.
However, Ham wrote that T-Mobile will have just 6 MHz of low-band spectrum on average nationwide and that low-band spectrum "will remain highly concentrated in the hands of" Verizon and AT&T.
"This means the need to place modest spectrum aggregation limits on the big two carriers in the upcoming 600 MHz broadcast incentive auction has not changed as a result of our transaction with Verizon," she wrote. "As the Department of Justice has explained, AT&T and Verizon have a strong economic incentive to keep other competitors from winning the low-band spectrum at auction, and without reasonable limits on what they can acquire, they are likely to walk away with all or the lion's share of the licenses offered. We hope the FCC will put the right rules in place to ensure we can continue to roll out the services and technologies consumers have come to expect from T-Mobile."
In a separate FCC filing, T-Mobile noted that it commissioned CostQuest Associates, an economic modeling firm, to estimate the cost of providing wireless service to unserved areas of 15 states using mid-band 1900 MHz PCS spectrum and 700 MHz spectrum. "CostQuest's census-block level, forward-looking cost analysis found the costs of wireless broadband deployment would be up to 2108% higher using mid-band PCS spectrum compared to low-band 700 MHz spectrum," the filing states. "CostQuest's model examined unserved areas in fifteen states representing many different topographies, network coverage requirements, and population densities."
T-Mobile wrote in its filing on the matter that the FCC "should design its auction rules in a manner that gives bidders of all sizes a meaningful opportunity to acquire spectrum where needed, rather than simply allowing AT&T and Verizon to continue their unfettered dominance of low-band spectrum resources."
Verizon, in a recent filing, aggressively pushed back on the notion that spectrum caps or bidding restrictions for the incentive auctions are needed, as T-Mobile and Sprint (NYSE:S) have argued. Verizon said that "in order to meet our customers' ever increasing demand for mobile broadband and to provide them with the highest quality service, Verizon will need additional spectrum and should be free to participate in the Incentive Auction on the same terms as any other bidder and without restrictions."
Verizon added: "Parties advocating restrictions have failed to support their assertions with evidence. They provide no evidence they would be unable to acquire 600 MHz spectrum in the absence of such restrictions. On the contrary, both Sprint and T-Mobile are backed by large multinational owners with ample ability to make the investment needed to compete at auction if they choose to do so. Nor do the proponents of restrictions assert that they have been unable to acquire the spectrum they need in auctions or in the secondary market. Similarly, proponents of restrictions do not provide evidence supporting the assertion that allowing Verizon and AT&T to participate fully in the auction might discourage other companies from bidding."
"In fact, unrestricted auctions in the United States have consistently attracted large numbers of smaller bidders that are undeterred by the presence of larger bidders, and those auctions have resulted in licenses being assigned to a wide variety of winning bidders," Verizon added. "There is therefore no basis to conclude that imposing restrictions is necessary to achieve any competition objective."
- see this T-Mobile blog post
- see this T-Mobile FCC filing
- see this second T-Mobile FCC filing
- see this Verizon FCC filing
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