U.S. Cellular (NYSE:USM) is signaling its opposition to a draft FCC plan for bidding rules for next year's incentive auction of 600 MHz broadcast TV spectrum, potentially driving a wedge between it and other smaller carriers.
In a recent FCC filing, U.S. Cellular said it doesn't want the FCC to reserve spectrum in the auction for carrier's that don't have large low-band spectrum holdings.
"We indicated that given a choice between the current proposal and a proposal that did not differentiate between reserved and unreserved spectrum, that we would prefer the latter," the carrier wrote. "We also indicated that our previous comments filed in this docket proposed a simple limitation on the amount of spectrum any carrier could win in any auction at no more than 25 percent. We continue to support such a proposal."
The FCC is set to vote on rules for the incentive auction at its May 15 meeting, but the final rules could change between now and then.
U.S. Cellular noted that "a failure to obtain sufficient 600 MHz spectrum could materially limit our ability to deploy 5G services to our existing customer base within a competitive timeframe." The carrier also said that "any proposal to limit access to restricted spectrum during the auction must assess each carrier's spectrum holdings in the aggregate and only then, if above one-third nationwide, apply a market-by-market spectrum holdings analysis."
Crucially, U.S. Cellular added: "Failure to adopt such a proposal will significantly limit our ability to bid for reserve spectrum across a substantial portion of our operating markets, including many of our key strategic markets."
U.S. Cellular is currently using its 700 MHz spectrum to deploy LTE services. The fact that U.S. Cellular owns that low-band spectrum could prevent it from bidding on 600 MHz spectrum reserved for carriers that already own large amounts of low-band spectrum.
Under the FCC's proposed 600 MHz auction rules, the commission would withhold, or reserve, up to 30 MHz of spectrum for auction bidders that hold less than one-third of the available low-band spectrum in that market. The amount of reserved spectrum would vary on a market-by-market basis based on demand, but wouldn't exceed 30 MHz. All bidders could bid on the unreserved spectrum in the market, but the reserved spectrum is intended for smaller carriers that don't have lots of low-band spectrum. Verizon Wireless (NYSE: VZ) and AT&T (NYSE: T) are opposed to the FCC's plan to withhold spectrum for smaller carriers, arguing it could drag down auction revenues.
However, Sprint (NYSE: S), T-Mobile US (NYSE:TMUS), Dish Network (NASDAQ: DISH) and public interest groups support the plan to reserve spectrum. Competitive Carriers Association President Steve Berry wrote in a blog post that the FCC should go further in its rules to aid smaller carriers, dovetailing with U.S. Cellular's call for the FCC to assess each carrier's aggregate spectrum holdings.
"Building on its proposed framework, the Commission should account for the effects of national market power during the auction, as the Department of Justice recommended, by adopting a national eligibility requirement for reserved spectrum in addition to a local eligibility requirement," Berry wrote. "A dual eligibility requirement would more accurately reflect market power while still allowing the two largest carriers to bid on reserved blocks of spectrum in local markets where they do not hold excessive low-band spectrum. Similarly, competition would be enhanced if the Commission reserved more licenses for competitive access by allocating an odd number of unreserved licenses, which would force the largest carriers to compete with each other and generate more revenue in both the reserved and unreserved blocks."
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