Sprint's Claure suggests bidding coalition with CCA members for 600 MHz spectrum

ATLANTA--Sprint (NYSE: S) CEO Marcelo Claure advocated for a coalition of smaller carriers that are members of Competitive Carriers Association to be able to jointly bid with Sprint in the 600 MHz incentive auction.

Top executives from other smaller carriers said they are interested in bidding in the auction, which is scheduled to start early next year. However, they said they need to see the final rules for the auction before deciding whether to jump in and cautioned that the rules need to be designed in such a way that competitive carriers can actually win airwaves.

CCA President Steve Berry, left, along with Sprint CEO Marcelo Claure, nTelos COO Rodney Dir, Cellular One CEO Jonathan Foxman and Bluegrass Cellular CEO Ron Smith, discussed the 600 MHz auction and net neutrality.

During a CEO roundtable discussion held here at CCA's Global Expo and moderated by CCA President Steve Berry, Claure said that Sprint's participation in the auction is still up in the air and that the carrier needs to look at the rules "with our eyes wide open." But he agreed with the conventional wisdom that the incentive auction presents the last chance for carriers to get low-band spectrum for the foreseeable future.

"Hopefully the rules of the auction will allow us to participate," he said, adding that the auction is a "great opportunity for us to lobby together to potentially form a coalition to go after this spectrum together."

Claure noted that smaller carriers operate in places where Sprint has no intention of building out its network and that Sprint competes in major markets where competitive carriers can't effectively compete, making them natural partners.

Sprint's position should come as no surprise. In an FCC filing Sprint made earlier this month, the carrier argued against the FCC's prohibition on joint bidding arrangements between nationwide carriers and said that it "favors a balanced approach that permits pro-consumer arrangements between competitive carriers while preventing competitively harmful joint bidding agreements."

Sprint wants the FCC to tie the eligibility of any joint bidding arrangements in the incentive auction to how much combined low-band spectrum the companies in such arrangements have. Specifically, Sprint wants the FCC to allow joint bidding arrangements in Partial Economic Areas where the parties collectively hold less than 45 MHz of spectrum below 1 GHz on a population-weighted basis. The FCC has established that specific 45 MHz threshold as the trigger for both applying extra scrutiny to spectrum deals and for being the cutoff that lets carriers bid on "reserved" spectrum in the incentive auction.

Rodney Dir, president and COO of nTelos Wireless, said that his firm, a Sprint wholesale partner, is "very interested" and "would love to participate" in the incentive auction. Cellular One CEO Jonathan Foxman also said it is his company's intention to bid in the auction.

Bluegrass Cellular CEO Ron Smith said he hopes Bluegrass will bid in the auction but that he also has some "major concerns" about the rules, which he said will "make it difficult for anyone Tier 3 and below to win" the spectrum.

Smith noted that in the aftermath of the AWS-3 spectrum auction, which raised more than $41 billion in net winning bids, there is a "good possibility we had some inflated numbers" and that the price of spectrum was artificially pushed higher. Now, he said, broadcasters expect to get the same kinds of prices to give up their spectrum. "If you set the bar too high, it's going to be difficult when it just takes out the lower end of the market," he said, meaning that it will be difficult for Tier 3 carriers to compete amid high spectrum valuations.

The executives also touched on the FCC's net neutrality rules, which are already being challenged in court. Under the rules, which the agency adopted in late February on a 3-2, party-line vote, the FCC reclassified broadband, including mobile broadband, as a telecommunications service under Title II of the Telecommunications Act. The rules ban blocking and throttling of content as well as paid prioritization. Additionally, the rules allow for "reasonable network management" that can be tailored to different types of networks but take a hard line, and they say that the management must be for technical purposes only and not commercial ones. Further, the rules will let the FCC judge on a case-by-case basis whether future mobile business practices unreasonably harm or interfere with the ability of consumers and content providers to access each other on the Internet.

Smith said he strongly objects to the rules and that using Title II might not be price regulation but is effectively service regulation. Carriers, he said, will be at the mercy of whatever the FCC staff's "notion of what fair is or what the business model should be for wireless."

"Every new, innovative service that we would want to offer could be reviewed," he said, which he said will be a "cooling hand on our industry" and harm innovation.

"We have gone into a situation with the FCC where they have defined mobile broadband as a telecom service," he said. "And that is a flight of fancy." Smith added:  "We don't want to be looking back and say that February 26 was the day mobility died."

Claure countered and said that because Verizon Wireless (NYSE: VZ) and AT&T (NYSE: T) have so much power in the industry, the FCC needed to step in and regulate. He also said that "nobody" really believes Verizon and AT&T's threats to stop investing in their networks because of net neutrality, since those carriers make so much money and have such high margins because of their networks.

At the same time, Claure said Sprint wants clarity and the ability to manage its network, especially at times of high usage. "You need an open Internet," he said. "With the power that certain carriers [have], if this is not regulated, they will pretty much determine what content goes to who."  

Yet Smith said that under the new rules Sprint will not have the flexibility it desires to manage its networks.

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