T-Mobile seen as favorite to win spectrum in 600 MHz auction, but smaller carriers likely to jump in as well

T-Mobile US (NYSE:TMUS) is seen as the carrier with the clearest shot to acquiring spectrum in next year's incentive auction of 600 MHz broadcast TV airwaves, especially now that Sprint (NYSE: S) has decided not to participate. However, dozens of smaller carriers that are members of the Competitive Carriers Association are still likely to participate and try to grab spectrum -- it's just not clear at this point how many ultimately will.

"The incentive auction is incredibly important for competitive carriers, and we are confident that CCA members will show up to the auction," CCA President Steve Berry said in a statement to FierceWireless. "As I have said before, the auction isn't just about the larger carriers; the FCC appropriately designed the auction to ensure all carriers, even the very small, have a meaningful opportunity to bid on and win low-band spectrum."

Berry added that "the incentive auction is a major focus of all our members" and that "participating requires a huge investment of time and resources for these carriers, and they understand the numerous benefits that additional low-band spectrum will bring to their customers." 

T-Mobile, Sprint, and other smaller carriers allied with the CCA fought assiduously to get the FCC to create a reserve of up to 30 MHz of spectrum per market that is expected to be available for smaller carriers without large reserves of low-band spectrum to bid on. However, despite the 600 MHZ band's strong propagation characteristics in boosting rural coverage, because the airwaves likely won't come into use for commercial wireless service until around 2020, some smaller carriers have pause over committing to an auction that is set to start at the end of March 2016.  

"The fact that we'd be tying up millions of dollars for three to four years is a major concern," Pat Riordan, CEO of Wisconsin-based carrier Cellcom, told CNET last week at CCA's conference in Ft. Lauderdale, Fla.

Riordan noted that the reserve covers every market and that Cellcom would likely still have to compete against AT&T (NYSE: T) or Verizon (NYSE: VZ) in some areas. "We are realizing now that the reserve doesn't do us any good," Riordan said.

Together, Verizon and AT&T control around 73 percent of the country's low-band spectrum, and AT&T and Verizon which will be excluded from bidding in many markets where they hold more than 45 MHz of low-band spectrum below 1 GHz. Yet according to maps provided by AllNet Insights & Analytics, while Verizon faces many more restrictions and will be barred from bidding on reserve spectrum in most of the country, it will be free to bid on the reserved spectrum in most of Florida, as well as parts of the Midwest, Maine, Oregon, Texas, Washington and Wisconsin, and several other markets scattered throughout the country. AT&T would face bidding restrictions in much of the Northeast, the West Coast, parts of the Southeast and in many of the largest metropolitan areas. However, AT&T would not face restrictions across vast swaths of the Midwest and Mountain states.

Some smaller carriers are enthusiastic about participating. Union Wireless Chief Technology and Operations Officer Eric Woody said last week at the CCA conference that he was hopeful Sprint's lack of participation might provide an opening for smaller operators. Woody said that Sprint's absence creates "one less deep pocket" for smaller carriers to compete with.

Woody also compared spectrum to land, noting: "They are not making more." He added that his company does want more low-band spectrum and said that he expects some of the bigger players to compete with Union in some of its markets even though they currently aren't offering service in those markets. "We know they will be playing and it's a concern. It will be challenging to make sure we can find the money for the spectrum we need," he added.

T-Mobile is clearly hoping it can scoop up lots of 600 MHz spectrum to improve its coverage in rural and urban areas, and has been the most enthusiastic among carriers about declaring its intent to participate. The company now controls 700 MHz A Block spectrum, but only in a 5x5 MHz block covers 190 million POPs. Kathleen Ham, senior vice president of government affairs for T-Mobile, told CNET she hopes the carrier will get the spectrum it needs from this auction. "We are banking on that," she said. "It's that important."

It's unclear though whether non-traditional players will participate. A Dish Network (NASDAQ: DISH) executive said last week the satellite firm may participate in the FCC's upcoming 600 MHz spectrum auction and is currently evaluating its options. In May, Charter Communications (NASDAQ: CHTR) filed comments with the FCC that agreed with many of the policy proposals of smaller carriers, but it's unclear whether Charter will take part; Charter declined to comment, according to CNET. Google (NASDAQ: GOOG) might participate, potentially in a consortium of non-traditional players, but there's no certainty the search giant will take part. Google also declined to comment, according to CNET.

Berry noted that CCA advocated for a larger reserve "so that more carriers can get access to this critically important low-band spectrum," but added that the 30 MHz reserve, the smaller geographic license sizes in Partial Economic Areas, an interoperability mandate, the lack of package bidding and other rules will help smaller carriers.  

"The FCC established pro-competitive policies that will encourage robust participation in the auction, including in regional and rural markets by establishing a 20 MHz cap on the amount of reserve spectrum that any one carrier can win in many smaller markets -- something that CCA fought hard for," Berry said. "The reserve is not about helping one or two carriers compete in the auction as some have claimed. Rather, as the FCC has acknowledged, it's about ensuring the 100+ competitive carriers serving rural, regional and nationwide markets have a fair chance to bid on and win 600 MHz spectrum." 

Berry acknowledged that some smaller carriers are "rightfully concerned" about getting access to and deploying 600 MHz spectrum as soon as possible after the auction. He noted that under the FCC's rules, broadcasters are required to move off the spectrum within 39 months. "Not surprisingly, broadcasters challenged this timeframe in court, but the D.C. Circuit upheld the FCC-mandated timeframe. Still, broadcasters are claiming they will not be able to clear off the spectrum that fast. In fact, they are claiming it could take twice that time," he said. "This is particularly troubling for smaller carriers who may be at the back of the line in the clearing process. CCA will continue to work to ensure broadcasters relocate in a timely and organized fashion. It's in the broadcasters' best interest, after all, because Congress mandated that the FCC make all reimbursement payments to broadcasters within three years of the completion of the auction."

For more:
- see this CNET article
- see this Broadcasting & Cable article

Related articles:
AT&T pushes FCC to deter 600 MHz auction defaults
Dish exec says company may participate in the FCC's 600 MHz incentive auction
AT&T's Lurie: $60B from the 600 MHz incentive auction is 'unrealistic'
Analysts: 600 MHz incentive auction could generate $60 billion, but per-MHz prices could be lower than AWS-3 auction
T-Mobile CFO on 600 MHz incentive auction: 'Dynamics are positive,' carrier could have up to $10B to spend 
T-Mobile seen as winner in Sprint's decision to bow out of 600 MHz incentive auction

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