AT&T knocks down T-Mobile's arguments against its 700 MHz deal with Appalachian Wireless

AT&T Mobility (NYSE: T) said the FCC should approve its purchase of 700 MHz spectrum from East Kentucky Network, which does business as Appalachian Wireless, and that T-Mobile US' (NYSE:TMUS) petition to block the deal is groundless.

Last month AT&T asked the FCC to approve its purchase of three Lower 700 MHz C Block licenses from East Kentucky Network. AT&T would be assigned 12 MHz of Lower 700 MHz C Block spectrum in 20 counties covering all of three cellular market areas (Huntington-Ashland, which touches all three states, and Lexington-Fayette and Madison in Kentucky). Post-transaction, AT&T would hold 113 to 145 MHz of spectrum in total, and 43 to 55 MHz of below-1-GHz spectrum, in the three CMAs.

In May 2014 the FCC approved new rules that said transactions resulting in a carrier gaining control of one-third of the spectrum below 1 GHz in a given market--which equates to roughly 45 MHz of low-band spectrum--"will be subject to enhanced review" in the FCC's case-by-case competitive evaluation of spectrum deals.

T-Mobile has been arguing that Verizon Wireless (NYSE: VZ) and AT&T already have too much low-band spectrum, and that the FCC should increase the size of the spectrum reserve in next year's incentive auction of 600 MHz airwaves to level the playing field. T-Mobile appears on its way to lose that regulatory battle.

"The Commission, meanwhile, must enforce its well-reasoned 'enhanced factor' analysis in a manner that meaningfully protects consumers against the increased market position that this transaction would allow AT&T to achieve," T-Mobile wrote in its filing last month to the FCC, asking the FCC to block the deal.

AT&T argued that T-Mobile's petition is missing the point. "This is a spectrum-only transaction. The transaction will not eliminate any competitors in these markets or diminish any other carrier's ability to respond to AT&T," AT&T wrote in its filing. "The spectrum is currently lying fallow, as EKN has not deployed this spectrum and has no plans to do so. AT&T will not only use that spectrum to deploy a cutting-edge LTE network, it can pair this spectrum with adjacent spectrum to increase its current 5x5 MHz deployments to a more spectrally efficient 10x10 MHz LTE deployment."

The FCC "has repeatedly and consistently held that transactions with these characteristics strengthen competition and provide strong public interest benefits," AT&T wrote.

"Although T-Mobile seems to think that any acquisition of spectrum below 1 GHz triggering the 'enhanced factor' test is per se anticompetitive, the Commission has made clear that enhanced factor review is merely a component of, and does not replace, the Commission's case-by-case review," of spectrum transactions," AT&T wrote. "Indeed, T-Mobile does not even cite the one case in which the Commission has actually applied 'enhanced factor' review to market-specific facts--the recent AT&T/Plateau Order--but that case confirms that the overarching question always remains simply whether the potential for competitive harms outweighs the public interest benefits of the transaction."

AT&T wrote that the FCC has held that where the potential for competitive harm is low, "the acquisition of below-1-GHz spectrum resulting in holdings of approximately one-third or more would not preclude a conclusion that a proposed transaction, on balance, furthers the public interest."

Thus, AT&T argues, "under the correct 'enhanced review' standard, as articulated and applied in the AT&T/Plateau Order, the proposed transactions raise no substantial issues and can be quickly approved."

For more:
- see this AT&T FCC filing

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