Reports: FCC's Wheeler opposed to T-Mobile's plan to increase size of 600 MHz reserve

The FCC plans, at the suggestion of Chairman Tom Wheeler, to reject a proposal from T-Mobile US (NYSE:TMUS), Sprint (NYSE: S) and other smaller carriers to increase the amount of spectrum set aside for smaller carriers to bid on in next year's incentive auction of 600 MHz broadcast TV spectrum, according to multiple reports.

Click here for a larger version of this image from AllNet Labs, which shows AT&T and Verizon's combined low-band spectrum holdings.

The reports, from Broadcasting & Cable and Bloomberg and citing unnamed sources, said that Wheeler has floated the proposal to keep the size of the reserve at a maximum of 30 MHz, instead of 40 MHz or more.

Since August 2014, T-Mobile has been calling for the FCC to increase the size of the spectrum reserve for smaller carriers from 30 MHz of spectrum to at least 40 MHz of spectrum in a given market. T-Mobile, Sprint, Dish Network (NASDAQ: DISH), C Spire Wireless and a group of policy and public interest groups forged a new alliance intended to pressure the FCC to craft 600 MHz auction rules that would increase the size of the reserve to 40 MHz or at least half of the spectrum available in the auction. T-Mobile CEO John Legere has kept up the pressure, urging customers to lobby the FCC on the issue.

"It's not over yet," T-Mobile spokesman Timothy O'Regan told Bloomberg. "We have a long way to go. The public conversation on the future of the mobile Internet continues. The five FCC commissioners still need to make their decision."

An FCC spokesman did not refute the report, but declined to comment and instead referred to a blog post from Wheeler that was posted on the FCC's website yesterday that laid out how the FCC is going to approach final rules for the auction, which is set to take place in early 2016.

"No single party will be happy with everything we've done, but the final product is a balanced solution to a challenging situation with more moving parts than a Swiss watch," Wheeler wrote.

The reserve is designed to let carriers with less than 45 MHz of spectrum below 1 GHz in a given market bid on the spectrum in that market. The move essentially prevents Verizon Wireless (NYSE: VZ) and AT&T (NYSE: T) from bidding on reserved 600 MHz spectrum in many markets.

Sprint and T-Mobile have argued that if the reserve is not increased to at least 40 MHz, then only one small carrier will be able to secure a 10x10 MHz block in the reserve, potentially letting AT&T and Verizon get another 10 MHz or more. Verizon and AT&T have argued that limiting their participation in the auction will depress auction revenues and will scare broadcasters away, since broadcasters will think they will not get as much money as they otherwise might be able to for their spectrum. Broadcaster participation is crucial for the incentive auction, since broadcasters need to sell their spectrum to the FCC so that carriers can bid on it.

AT&T recently argued that T-Mobile's position is more about making sure T-Mobile has less competition in bidding in urban markets than in expanding its rural coverage.

Wheeler wrote that the FCC's staff yesterday briefed the staffs of his fellow commissioners on proposed recommendations to establish final rules for the auction. The FCC will likely vote on the final rules at the FCC's July 16 meeting.  

According to Broadcasting & Cable, the FCC proposal put forward by Wheeler would drop what is known as "dynamic reserve pricing," which broadcasters argued would artificially lower how much money they would get for relinquishing their spectrum.

Under dynamic reserve pricing, a UHF broadcaster may be offered a lower price for its spectrum even if it cannot feasibly be assigned a channel in the remaining TV portions of the UHF band; if it refuses the offer, it may be assigned to a channel in the 600 MHz band with wireless carriers. 

"The proposal aims to clear the highest possible amount of spectrum for broadband consistent with broadcasters' voluntary decisions to relinquish some or all of their spectrum usage rights. At the same time the proposal limits the number of impaired new licenses that are created in those isolated instances where it is necessary to relocate a TV broadcaster on the same or adjacent frequencies as those being auctioned," Wheeler wrote in describing an outline of the rules.

"The proposal eliminates bidding procedures that many commenters believed were burdensome and could limit broadcaster participation," he wrote, likely referring to dynamic reserve pricing. "It also adopts a formula for opening bid prices that creates value for both broadcasters and American taxpayers. The proposal responds to requests to make more information about bidding available to bidders before and during the auction. And it ensures that competitive wireless carriers and new entrants have a clear shot at adding sufficient low-band spectrum to their portfolios so that they can compete more effectively in both rural and urban areas."

For more:
- see this Bloomberg article
- see this Broadcasting & Cable article
- see this FCC blog post

Related articles:
Report: FCC has reached out to 2/3 of eligible broadcasters about 600 MHz auction
AT&T: T-Mobile's 600 MHz reserve strategy is about protecting urban markets, not expanding rural coverage
Verizon, T-Mobile's Legere knock each other in 600 MHz spectrum reserve fight
T-Mobile keeps lobbying FCC to increase size of 600 MHz reserve
Report: T-Mobile, Sprint won't get extra 600 MHz reserve in FCC auction

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