WASHINGTON--Competitive Carriers Association President Steve Berry said he is confident that next year's incentive auction of 600 MHz broadcast spectrum will draw wide participation from smaller carriers and that the auction will be successful.
"I fully expect every competitive carrier to want to get access to this [600 MHz] ecosystem," Berry said at event here on Wednesday. Participating will give smaller carriers a chance to get more spectrum for next generation LTE services, he added. The event was press briefing sponsored by the New America Foundation think tank. Besides, Berry speakers included representatives from Sprint (NYSE: S), T-Mobile US (NYSE:TMUS), Dish Network (NASDAQ: DISH), and public interest groups Public Knowledge, Free Press and the Consumer Federation of America.
As the FCC prepares to vote next week on rules for the incentive auction, representatives of smaller carriers said they are positive about the framework the FCC has proposed. Verizon Wireless (NYSE: VZ) and AT&T (NYSE: T) have argued that rules that could limit how much spectrum they can bid on at the auction are unfair, but representatives from competitive carriers and public interest groups said that the large carriers will still be able to bid on vast amounts of spectrum.
Both AT&T and Verizon have expressed their strong displeasure with proposed rules that could potentially limit how much spectrum they can bid on in certain markets. AT&T argued last week that "there is simply no basis" to give Sprint and T-Mobile special treatment in the auction, because they already control low-band spectrum. Verizon 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."
Berry said he could not say whether AT&T and Verizon will petition the FCC to change or reverse such rules if the full commission votes to approve them. "They clearly have a right to do that," he said. "I really don't see where they would have much legal ground to stand on." Berry noted that the 2012 law that authorized the FCC to conduct the incentive auction grants it the authority "to adopt and enforce rules of general applicability, including rules concerning spectrum aggregation that promote competition."
Berry also said any delay ahead of the auction will delay the carriers ability to start deploying the 600 MHz airwaves. "There is a lot in this structure of this auction for everyone," he said.
Under the FCC's proposed rules, the commission 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 spectrum reserve "trigger point" during the pre-auction process to figure out at what point the auction would split into "reserved" and "unreserved" bidding. The FCC is going to open up to comment what that trigger point will be; it hasn't been decided yet but it could be related to market prices or when enough money has been raised in bidding to pay broadcasters and clear them from the spectrum they are giving up.
When the trigger point is reached, 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.
Importantly, 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.
Jeff Blum, Dish's senior vice president and deputy general counsel, said at the briefing that the reserved spectrum part of the auction will only take effect if the trigger point is reached in a market. It "only kicks in when revenue has been raised to pay for broadcasters' repacking. If sufficient revenue is not generated, there will be no reserve."
Berry said he calculated that AT&T will be able to bid in two-thirds of all the markets in which spectrum is likely to be reserved. "We have the possibility of an auction that brings in as much on the reserved [spectrum] as on the unreserved," he said.
Kathleen Ham, T-Mobile's vice president of federal regulatory affairs, said if AT&T is concerned about having enough spectrum to augment capacity on its network, the AWS-3 auction, scheduled for this fall, is a perfect opportunity for AT&T to acquire mid-band spectrum.. "Go at it," she said. "If that's the issue with their network, go solve it."
Ham added: "This is the last opportunity for this type of [low-band] spectrum to be rolled out that any of us are aware of," and that T-Mobile needs to acquire it to be able to sufficiently compete on a national basis.
The FCC plans to auction the spectrum in Partial Economic Areas license sizes, the middle ground between large Economic Areas and smaller Cellular Markets Areas. "Anything larger than a PEA would have been the equivalent of a regulatory execution for every small carrier in the United States," Berry said, adding that the FCC "should be commended" for going with PEAs.
Not everyone in the nation's capital is on board with the proposals endorsed by the pariicpants at the New America Foundation. A spokesperson for Mobile Fuutre, a coalition mobil and Internet companies whose membership includes Verizon and AT&T, said in a sttaement that that "despite the pleadings we heard today for special treatment and special favors from companies like T-Mobile and Sprint, the stakes for our mobile economy are simply too high to risk turning the important upcoming 600 MHz auction into yet another science experiment."
"The fact is that all American mobile customers--not just a select few--need more spectrum. A successful auction hinges on substantial supply as well as demand," the spokesperon said. "Artificially limiting either via regulatory fiat would be a grave mistake. The FCC has a real opportunity to sustain American mobile competition while addressing our increasingly congested networks--not by picking auction winner and losers--but by agreeing to a simple, inclusive, and fair incentive auction design that welcomes all sellers and buyers equally. Anything less will not just jeopardize the overall ability of the auction to succeed, but also America's continued wireless broadband leadership."
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