T-Mobile's Legere calls AWS-3 auction 'disaster' for consumers, urges at least a 40 MHz reserve for 600 MHz auction

T-Mobile US (NYSE:TMUS) CEO John Legere thinks the FCC's recently completed AWS-3 auction was a smashing financial success for the U.S. Treasury but a "disaster for American wireless consumers" because he said AT&T (NYSE: T) and Verizon Wireless (NYSE: VZ) won the lion's share of the spectrum (Dish Network's (NASDAQ: DISH) bidding partners also won a major chunk of AWS-3 spectrum). Legere wants to make sure that doesn't happen in the 600 MHz incentive auction.

In a blog post, Legere wrote that the rules for the next auction should be focused on "fostering competition in the US wireless industry and doing what's right for the American consumer."

"AT&T and Verizon showed that they can, and will, dig into their deep pockets to corner the market on available spectrum at nearly any cost," Legere wrote. "To add insult to injury, the FCC's rules actually allowed companies that don't provide wireless service at all to buy up huge amounts of spectrum and sit on it for ten years! The results are not good for consumers. Three companies alone spent an insane $42 billion between them, grabbing a ridiculous 94 percent of the spectrum sold at this auction." [Editor's note: emphasis is Legere's.]

T-Mobile paid $1.77 billion for 151 licenses in the AWS-3 auction to fill out its mid-band spectrum portfolio. AT&T spent $18.2 billion for AWS-3 licenses it says cover 96 percent of the U.S. population. Verizon spent $10.4 billion for 181 AWS-3 licenses in markets covering 192 million POPs, or 61 percent of the United States. Dish's bidding entities paid $13.3 billion for 702 licenses, winning 25 MHz of total spectrum including 13 MHz of paired spectrum.

"This whole thing should scare the hell out of you and every other wireless consumer in the US, because there is another important auction coming next year, and the results have to be different if wireless competition is going to survive," Legere wrote.

Legere wrote that American consumers should urge the FCC to adopt rules that favor T-Mobile and other smaller carriers, noting that Verizon and AT&T already control 73 percent of low-band spectrum in the industry. He wrote that the FCC should resist efforts to delay the start of the incentive auctions, currently scheduled for early 2016, because that will only give Verizon and AT&T more time to get financing in place for the auction.

He also wrote that "the rules need to promote competition by reserving 40 MHz or at least half of the available spectrum in the next auction for sale to the competition. We're not asking for a government handout like the Twin Bells got. We're just asking that the rules level the playing field to sustain a competitive market."

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 current rules reserve up to 30 MHz of spectrum for smaller carriers like T-Mobile that hold less than 45 MHz of low-band spectrum to bid on. T-Mobile has been clamoring for months to increase the size of the reserve to at least half of the spectrum that is available in a given market.

That's because 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, under the FCC's current rules.

During T-Mobile's fourth-quarter earnings conference call, Legere added that he is "not whining and waving the white flags"

"What I am really trying to put a light on for the United States consumer and Washington itself is that, this competition that is happening, if you like it you have got to do things to ensure that it will continue," he said.

For more:
- see this T-Mobile blog post

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