AT&T: There's 'no basis' to give Sprint, T-Mobile a leg up in incentive auction

Just like Verizon Wireless (NYSE: VZ), AT&T (NYSE: T) is taking aim at its smaller competitors in its opposition to draft FCC rules that could restrict how much spectrum the two largest carriers can bid for in the commission's upcoming incentive auction of 600 MHz broadcast TV spectrum.

In a filing with the FCC AT&T made late last week, AT&T argues has it has won the vast majority of its low-band spectrum through auctions and secondary market transactions. In terms of more recent spectrum transactions, AT&T argues that decisions made by Sprint (NYSE: S) and T-Mobile US (NYSE:TMUS) to repurpose or buy low-band spectrum means they should not be given special treatment in the incentive auction.

The FCC is set to vote on rules for the incentive auction at its May 15 meeting. There is likely going to be a flurry of lobbying and haggling before then, as Verizon and AT&T fight against proposed rules that could restrict how much low-band spectrum in each market they can bid on.

AT&T noted in its filing that in 1996 Sprint chose to spin off Centel's cellular operations and 850 MHz holdings "so it could focus on deploying PCS spectrum instead." AT&T also noted one of "T-Mobile's predecessors was Omnipoint, which received a Pioneer's Preference license for 30 MHz of PCS spectrum in New York City."

"Since that time, Sprint and T-Mobile have placed a higher value on gaining the efficiencies of building larger blocks of compatible spectrum, and thus they have focused on adding to their stores of high-frequency spectrum," AT&T wrote. "In pursuing this strategy, they have freely declined opportunities to pursue low-frequency spectrum--the most prominent example being the decision by both companies not to participate in the 700 MHz auctions."

More recently, AT&T noted, T-Mobile bought 700 MHz A Block spectrum from Verizon covering 158 million POPS, including 21 of the top 30 U.S. markets. The filing also notes that Sprint has announced that it will use its 800 MHz spectrum "as the low-frequency foundation of its Sprint Spark service," the company's tri-band LTE service.  

"In short, there is simply no basis to give Sprint and T-Mobile special treatment in this auction," AT&T wrote. "When Sprint entered the 1995 auctions for PCS spectrum, it was the highest bidder of all wireless providers, and acquired the most spectrum. Similarly, when T-Mobile entered the 2006 AWS-1 auction, it was the highest bidder of all wireless providers, and acquired the most spectrum. SoftBank and Deutsche Telekom, the current parent companies of Sprint and T-Mobile, are major global corporations that have the wherewithal to participate in this auction on a full and fair basis, and giving these companies a leg up is unfair and without justification."

Verizon made a similar argument last week, and told the FCC it would be "perverse and unjust" for the FCC to adopt auction rules that "subsidize some large multinational companies at the expense of their competitors."

The FCC 's proposed rules for the incentive auction would establish a market-based reserve of up to 30 MHz of spectrum for carriers that currently hold less than one-third of available low-band spectrum in a market. The FCC would then establish a still-undefined spectrum reserve "trigger point" to determine at what point the auction would split into "reserved" and "unreserved" bidding.

When that happens, the amount of "reserved" spectrum in each market will be established based on demand in that market by eligible bidders, but it will be no more than 30 MHz. If demand for the reserved spectrum is less than 30 MHz at that point, the remaining balance would be available on an unreserved basis.

Crucially, any carrier that holds more than one-third of available low-band spectrum in a market would be able to bid on all unreserved spectrum in that market, but would be ineligible to bid on any reserved spectrum, which is likely going to restrict Verizon and AT&T in many markets. The FCC also said that any provider that holds less than one-third of available low-band spectrum in a market would be able to bid on all unreserved spectrum in that market, and all reserved spectrum in that market.

For more:
- see this AT&T filing (PDF)

Related Articles:
Verizon takes aim at Sprint, T-Mobile in pushing back on FCC auction restrictions
With 2.5 GHz, Sprint won't have much wiggle room in FCC's new spectrum screen
FCC to add Sprint, Dish spectrum to spectrum screen
AT&T warns it might skip 600 MHz incentive auction due to FCC's proposed restrictions
Report: FCC's planned incentive auction rules would set aside spectrum for smaller carriers
Wooing TV broadcasters is FCC's next big job for 600 MHz incentive auction