T-Mobile US (NYSE:TMUS) is continuing to press its case to the FCC that the commission should reserve more spectrum for smaller carriers in the 2016 incentive auction of 600 MHz broadcast TV spectrum. T-Mobile fears that the way the auction is currently designed will allow Verizon Wireless (NYSE: VZ) and AT&T (NYSE: T) to walk away with the bulk of the spectrum licenses up for bid, leaving minimal amounts of spectrum in the "reserved" pool for smaller carriers like T-Mobile, Sprint (NYSE: S) and others.
On Dec. 17, Kathleen Ham, T-Mobile's vice president of federal regulatory, and Steve Sharkey, director and chief of engineering and technology policy at T-Mobile, along with a consultant and another lawyer, met with Renee Gregory, legal adviser to FCC Chairman Tom Wheeler.
During the meeting T-Mobile and its representatives reiterated the importance of low-band spectrum and the importance of the incentive auction's spectrum reserve--since August T-Mobile has been petitioning the FCC to increase the size of the reserved spectrum to be set aside for smaller carriers. T-Mobile previously argued that the FCC should set aside at least half of all of the spectrum that is cleared in a given market for smaller carriers.
In its most recent presentation to the FCC, T-Mobile proposed increasing the size of the spectrum reserve from three blocks to four (assuming at least seven 10 MHz block are cleared).
"Expanding the reserve would ensure that the two dominant carriers will be forced to compete with one another in the auction and that sufficient blocks will exist for two non-dominant carriers to acquire spectrum sufficient to compete nationally against the two dominant providers," T-Mobile states in its filing.
The incentive auction will consist of two main parts: The first is a "reverse" auction, in which broadcasters agree to sell their spectrum rights. Then the FCC will conduct a more traditional "forward" auction in which carriers and other entities bid on the spectrum licenses. After the auction, the spectrum will then be moved around or "repacked" based on which stations relinquish their spectrum.
In May, the FCC approved tentative 600 MHz auction rules designed to prevent Verizon and AT&T from acquiring all the available spectrum up for grabs. The rules reserve up to 30 MHz of spectrum for smaller carriers like T-Mobile and others.
Crucially, however, in situations where broadcasters have given up only 60 MHz of spectrum, only 20 MHz can be reserved, and where broadcasters have given up 50 MHz of spectrum, only 10 MHz can be reserved.
T-Mobile contends that if only a maximum of 30 MHz is reserved, Verizon and AT&T will be able to divide the unreserved spectrum evenly between them and pay less than they should. Meanwhile, T-Mobile argues, there will not be enough spectrum for smaller carriers to acquire. However, if there were four blocks set aside as a reserve, Verizon and AT&T would need to bid against one another for unreserved spectrum, increasing auction revenues, and then there would be enough reserved spectrum for two smaller carriers to get sufficient airwaves to compete nationally.
In its meeting last week, T-Mobile representatives also reiterated the company's position that the "use of the revenue test (a minimum average price per MHz-POP per unit of spectrum sold) in the incentive auction creates the risk of anti-competitive foreclosure, reduced participation in the forward and reverse auctions, reduced spectrum clearing for wireless broadband, and lower auction revenues."
In its tentative rules, the FCC has set a benchmark of $1.25 per MHz-POP that must be reached in the largest markets before wireless carriers can start bidding on the reserved spectrum. T-Mobile argued that the specific price per MHz-POP benchmark will "discourage forward auction participation and lower revenues" as well as "frustrate reverse auction participation and reduce spectrum clearing by preventing willing broadcasters from selling licenses to forward auction participants willing to pay the broadcasters' asking prices." Additionally, it would make Verizon and AT&T's "anti-competitive foreclosure strategy easier to implement."
- see this FCC filing
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