T-Mobile wants FCC to block AT&T's 700 MHz purchases as 600 MHz auction looms

T-Mobile US' (NYSE:TMUS) battle with AT&T Mobility (NYSE: T) over the size of the spectrum reserve in next year's incentive auction of 600 MHz airwaves--and over access to low-band spectrum generally--moved into a new venue. T-Mobile asked the FCC to block AT&T's deal to buy some 700 MHz spectrum in parts of Kentucky, Ohio and West Virginia, arguing that with the deal "AT&T will prove far more able to exclude competitors, raise their costs, damage their businesses and ultimately lessen competition" in the markets in question.

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 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.

In that context, the fight over a few licenses AT&T wants to buy is about something much larger. T-Mobile has been arguing that Verizon and AT&T already have too much low-band spectrum, and it appears it is going to continue to fight on that front.

Last month AT&T asked the FCC to approve its purchase of three Lower 700 MHz C Block licenses from East Kentucky Network. AT&T would be assigned 12 MHz of Lower 700 MHz C Block spectrum in 20 counties covering all of three Cellular Market Areas (Huntington-Ashland, which touches all three states, and Lexington-Fayette and Madison in Kentucky). Post-transaction, AT&T would hold 113 to 145 MHz of spectrum in total, and 43 to 55 MHz of below-1-GHz spectrum, in the three CMAs.

In May 2014 the FCC approved new rules that said transactions resulting in a carrier gaining control of one-third of the spectrum below 1 GHz in a given market--which equates to roughly 45 MHz of low-band spectrum--"will be subject to enhanced review" in the FCC's case-by-case competitive evaluation of spectrum deals.

In its petition, T-Mobile argues that "the license assignments sought in the Application would result in AT&T holding more than one-third of the spectrum below 1 GHz in the Huntington-Ashland and Lexington-Fayette CMAs. Although six entities currently hold low-band spectrum in these Markets, this transaction, if approved, will eliminate one of them entirely."

T-Mobile said it has around 42,000 subscribers in the Lexington region, or around 4 percent market share, "making it the smallest competitor in the area." T-Mobile said it has no presence in the Charleston-Huntington area, "and it needs low-band spectrum to begin providing competitive, affordable wireless services to consumers in" that market.

T-Mobile says AT&T is not meeting the higher standard for spectrum deals below 1 GHz that result in it acquiring more than one-third of such spectrum in a market but that it needs to. "The Commission, meanwhile, must enforce its well-reasoned 'enhanced factor' analysis in a manner that meaningfully protects consumers against the increased market position that this transaction would allow AT&T to achieve," T-Mobile wrote in its filing.

In response, Joan Marsh, AT&T's vice president of federal regulatory, wrote in a company blog post that the deal "will enable AT&T to offer faster and higher quality services to its rural customers."

"The proposed transaction also has no adverse competitive effects," she wrote. "AT&T will not exceed the Commission's spectrum aggregation screen and--because the spectrum at issue currently sits completely fallow and unused–the deal will not reduce any actual competition."

"T-Mobile's disdain for rural investment has long been evident," Marsh added. "Looking at T-Mobile's current and proposed coverage maps, it's readily apparent that T-Mobile offers very little coverage in these markets today. Moreover, even as it purportedly expands to cover 300M POPs by the end of 2015, T-Mobile has only limited plans to invest in the rural markets covered by these licenses, particularly those in West Virginia. T-Mobile also has 20-30 MHz of AWS spectrum in all of these markets that it could use to serve these rural communities if it chose. Finally, if T-Mobile wants low band spectrum for these markets, it could buy the 700 MHz A block spectrum (which is largely undeployed in these markets) and deploy it--a path it is following for many other markets.

"Yet, T-Mobile chooses to do none of these. Instead it is spending resources on trying to block AT&T from investing in rural America," Marsh wrote. "I guess un-investment in un-urban markets is the un-carrier thing to do."

For more:
- see this FCC filing (PDF)
- see this AT&T blog post
- see this Re/code article

Related articles:
AT&T hunts for 700 MHz spectrum in Kentucky, Ohio and West Virginia
Reports: FCC's Wheeler opposed to T-Mobile's plan to increase size of 600 MHz reserve
AT&T: T-Mobile's 600 MHz reserve strategy is about protecting urban markets, not expanding rural coverage
Verizon, T-Mobile's Legere knock each other in 600 MHz spectrum reserve fight
T-Mobile keeps lobbying FCC to increase size of 600 MHz reserve

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