T-Mobile blasts AT&T's 600 MHz auction position as 'sacrificing competition'

AT&T Mobility (NYSE:T) again blasted proposals by T-Mobile US (NYSE:TMUS) to restrict bidding in next year's incentive auctions of 600 MHz broadcast spectrum, arguing that they will doom the auction to failure.

AT&T is particularly pushing back against the notion of spectrum "set-asides," or portions of the spectrum that will be auctioned that would be specifically set aside for smaller or new entrants. The FCC is expected to release its incentive auction rules sometime in May.

In a company blog post, Joan Marsh, AT&T's vice president of federal regulatory, wrote that "most observers believe this auction would be deemed wildly successful if it yielded 70 MHz of paired spectrum, which will require that 84 MHz (at a minimum) be cleared."

The FCC may decide on rules that limit how much spectrum AT&T and Verizon Wireless (NYSE:VZ) can bid for in the auction. Such rules would likely benefit Sprint (NYSE:S), T-Mobile and other smaller carriers, and AT&T and Verizon have argued against them for the better part of a year.

Based on the prices AT&T paid for the 700 MHz B block in 2008, AT&T's Marsh wrote that it would likely cost at least $20 billion for the FCC to attract enough broadcasters to give up 84 MHz of spectrum (the 600 MHz first will require TV broadcasters to relinquish their spectrum in return for auction proceeds). When the cost required to repack stations and fund the FirstNet public safety broadband network are factored in, the price tag could be up to $30 billion, she wrote.

Marsh also wrote that no one bidder can "run the table" with a price tag that high. "The T-Mobile argument is that AT&T and Verizon will run the table, but that too seems highly improbable," she wrote. "The Commission should instead be focused on ensuring that the wireless industry as a whole can raise the $30 billion in auction capital that may be needed to close an 84 MHz auction, especially given capital commitments that will be made for the AWS-3 auction. And notably, as we learned with the H Block auction, there is no guarantee that all major operators will even show up."

Further, Marsh said any set-asides of any type "will only exacerbate the $30 billion revenue challenge." She wrote that "any spectrum set-aside is not about restricting Verizon and AT&T so they can't run the table--that could easily be accomplished by a non-discriminatory bidder neutral limit on how much any one bidder could acquire. In contrast, a set-aside is designed to force Verizon and AT&T to bid against each other, thus raising their costs for spectrum, while sheltering T-Mobile and others from bidding competition so they can get their allocations at a discount. It's easy to see why T-Mobile would like that approach; it's less easy to defend such market distortions as legitimate public policy."

Finally, Marsh wrote that a cap on the amount of low-band spectrum a carrier can acquire would also depress revenue for the auctions. "T-Mobile and others have also proposed that the FCC impose low band caps or limits that would permit bidders to bid freely only where they don't exceed that cap," she wrote. "While this rule may appear non-discriminatory in theory, in practice it will likely act as an exclusion. AT&T acquired 700 MHz spectrum at auction and has moved with determination in the secondary market to rationalize that footprint and deploy an efficient 10x10 [MHz] LTE network. As we have long said, 10x10 is table stakes in a LTE world."

T-Mobile responded sharply: "AT&T has demonstrated admirable consistency in its public comments on the incentive auction--that somehow sacrificing competition for duopoly is good public policy," Kathleen Ham, vice president of federal regulatory affairs at T-Mobile, said in a statement in response to Marsh's post. "Only an auction with robust competition from multiple bidders of all size will meet revenue objectives and result in a competitive, innovative mobile broadband landscape for the future that benefits consumers."

For more:
- see this AT&T blog post

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