T-Mobile US' (NYSE:TMUS) push to increase the size of the spectrum reserve in next year's incentive auction of 600 MHz broadcast TV spectrum got a shot in the arm after the Department of Justice urged the FCC to give "considerable weight" to how large the reserve should be. However, according to a Washington Post report, T-Mobile's lobbying efforts on the issue are alienating allies in Washington and could backfire.
T-Mobile has been pushing the FCC to expand the amount of spectrum it and smaller carriers can bid on in each market from a maximum of 30 MHz to at least 40 MHz. AT&T (NYSE: T) and Verizon Wireless (NYSE: VZ), which will be excluded from bidding in many parts of the country where they hold more than 45 MHz of low-band spectrum, have argued against such a move, and reports have indicated that FCC Chairman Tom Wheeler is leaning toward opposing T-Mobile's position.
While the Justice Department did not specifically embrace a reserve of 40 MHz, a T-Mobile spokesperson told the Washington Post it was as close to an endorsement of T-Mobile's position as one could expect.
"A number of stakeholders have called for the Commission to increase the amount of spectrum reserved from 30 to at least 40 MHz. They assert that unless there is a reserve of at least 40 MHz, the two largest carriers will be able to further enhance their dominance in low-frequency spectrum holdings, limiting the potential for vigorous competition going forward," William Baer, the assistant attorney general for the DOJ's Antitrust Division, wrote in the letter to the FCC. "The Department recognizes that the Commission must balance competing policy priorities in setting the appropriate reserve levels. In balancing these priorities the Department urges the Commission to give considerable weight in determining the amount of spectrum included in the reserve to protecting and promoting competition and the well-established competition principle that those with market power may be willing to pay the most to reinforce a leading position."
T-Mobile's argument is that a reserve of 30 MHz of spectrum would let smaller carriers bidding on that spectrum acquire only one 10x10 MHz configuration, which most regard as essential to strong LTE deployments. T-Mobile argues that Verizon and AT&T would then be able to split the remaining 40 MHz of non-reserved spectrum evenly between them, and that Verizon and AT&T could bid on reserved spectrum in markets where they do not hold more than 45 MHz of low-band spectrum.
In a company blog post, Andy Levin, T-Mobile's senior vice president of government affairs, notes that "where AT&T or Verizon holds less than one-third of all of the low-band resources, AT&T or Verizon can purchase all of the blocks available in that market," and that the reserve "does not come into being until after the auction raises enough funds to cover all broadcaster expenses and all other statutory funding goals." He also notes that "the reserve is a maximum of only three of the up to ten blocks that the auction will make available. The reserve is so small, in fact, that it cannot support more than, at most, one meaningful rival to AT&T and Verizon."
"The Big Two's overwhelming dominance in low-band spectrum holdings, and the coverage advantages that brings, allows them to refuse to budge on prices to consumers and is the biggest barrier to a more competitive wireless market," Levin added. "Little wonder that AT&T and Verizon are so desperate to keep their competitive advantage—so they do not have to lower prices for their combined base of 220 million customers."
T-Mobile, including CEO John Legere, have been aggressive in lobbying the FCC and Congress on the issue. T-Mobile even issued a comic book with Legere as a super hero fighting the villains--AT&T and Verizon. All of that has rankled some in Washington who would be inclined to help T-Mobile.
"The perception is, they are being greedy," an unnamed senior FCC official told the Post when speaking of T-Mobile. "They won a big victory by getting 30 MHz of spectrum, but aren't satisfied."
"Some of T-Mo's friends on the Hill have complained that the asks are unreasonable and the tactics are uncomfortable," an unnamed Democratic aide told the Post.
The Competitive Carriers Association has urged the reserve be larger to help smaller carriers and Democratic Senators Ed Markey (Mass.), Al Franken (Minn.), Richard Blumenthal (Conn.), Maria Cantwell (Wash.) and Ron Wyden (Ore.) urged the FCC to use the incentive auction to reduce the concentration of low-band spectrum.
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