T-Mobile spars with AT&T over rules for broadcast spectrum auction

T-Mobile US (NYSE:TMUS) shot back at rival AT&T (NYSE:T), arguing for rules that would prevent larger wireless carriers from dominating the upcoming broadcast TV spectrum auction.

In a letter to the FCC, Tom Sugrue, T-Mobile's senior vice president of government affairs, waded into the debate that was touched off last month when the Department of Justice called on the FCC to ensure Sprint Nextel (NYSE:S) and T-Mobile have ample opportunity to acquire 600 MHz spectrum that will be made available via the incentive auctions of broadcast spectrum, which are currently scheduled to start next year.

AT&T and Verizon subsequently blasted the DOJ's argument  "It is surprising that the Antitrust Division of the Department of Justice would even propose measures that are so nakedly designed to help specific companies," wrote Wayne Watts, AT&T's senior executive vice president and general counsel, in response to the DOJ's suggestions.

Speaking at an investor conference today, Verizon Wireless CEO Dan Mead echoed AT&T's concerns. "I think the industry should be concerned about kind of picking winners and losers in something like that. We have been very vocal in a responsible way with everyone in Washington about the importance of a level playing field," Mead said.

However, T-Mobile's Sugrue wrote that the DOJ is proposing "a spectrum cap that is applied pre-auction and that recognizes the unique value of below 1 GHz spectrum and the highly concentrated holdings of spectrum in that frequency range. The Department's proposals are designed to ensure the wireless marketplace remains competitive and that all carriers have an opportunity to access spectrum--the most critical input to wireless competition."

T-Mobile wrote that such rules will not benefit one company over another but will ensure wireless competition. T-Mobile has proposed that the FCC adopt auction rules limiting any licensee from acquiring more than a certain percentage of spectrum below 1 GHz in the incentive auctions. "These rules would not preclude auction entry; they would merely allow all carriers to have a fair opportunity to bid on the spectrum and compete in the wireless marketplace," Sugrue wrote.

Sugrue also argued that such rules would not reduce auction revenues, as AT&T and others have contended. "To the contrary, the certainty and fairness of a pre-announced set of auction rules would not only encourage broader participation in the auction, it would also facilitate prospective bidders' abilities to plan their networks, services, technologies, and business models, and secure the necessary financing," he wrote. "Such an approach would result in increased, not decreased, auction revenues."

A recent nonpartisan study released by the Center for Business and Public Policy at Georgetown University's McDonough School of Business found that rules that bar Verizon and AT&T from participating fully in the upcoming auction "could reduce auction revenues by about 40 percent--lowering federal auction proceeds from as much as $31 billion to approximately $19 billion."

Sugrue wrote that, despite AT&T's protestations otherwise, there is real risk that "a dominant carrier would bid a premium over and above the use value of spectrum in order to keep that spectrum from being used by a rival."

For more:
- see this T-Mobile FCC filing

Special Report: FierceWireless' spectrum auction guide: What you need to know about the upcoming auctions

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