Verizon Wireless (NYSE: VZ) came out against joint bidding arrangements for future spectrum auctions, allying itself with AT&T Mobility (NYSE:T) and setting up a battle with Sprint (NYSE: S) and T-Mobile US (NYSE:TMUS) ahead of next year's 600 MHz incentive auction.
However, Verizon, like AT&T and T-Mobile, also told the FCC that the recently completed AWS-3 auction, and Dish Network's (NASDAQ: DISH) partnership with so-called designated entities to win spectrum in that auction, show that the commission needs to take a tougher line on joint bidding.
In a filing with the FCC, Verizon notes that existing FCC rules already state that bidders in spectrum auctions are subject to antitrust laws, which prohibit collusion and other forms of bid rigging in an auction context. Referring to Dish, Verizon noted that "despite that prohibition, in the recent AWS-3 auction, three applicants closely coordinated their bids and bidding strategies on hundreds of licenses. Commenters explain how this coordination gave those applicants advantages, deterred other bidders, and undercut the integrity of that auction."
"To prevent a recurrence in future auctions, the Commission at a minimum should reinforce the existing prohibition against collusion by prohibiting all joint bidding arrangements or other communications about bids or bidding strategies among two or more applicants for the same licenses," Verizon noted.
Verizon thinks the only exception should be that "bidders may pool their resources to bid on licenses through a single consortium, subject to advance disclosure requirements."
Sprint and T-Mobile have been urging the FCC to allow joint bidding arrangements in the incentive auction, arguing that the agency should not issue a blanket prohibition against them for nationwide operators. AT&T's views are in line with Verizon; AT&T wants any companies that wish to bid jointly to form a consortium or joint venture well before the auction. However, both T-Mobile and AT&T also want the FCC to make its rules more restrictive for the incentive auction to curtail the kind of bidding arrangements Dish established for the AWS-3 auction.
Dish's Northstar Wireless and SNR Wireless designated entities won 25 MHz of spectrum in the AWS-3 auction, including 13 MHz of paired spectrum, and qualified for $3.3 billion in small business discounts, taking their bill down to $10 billion from $13.3 billion. Dish and its DEs said they complied with the FCC's rules, but Verizon, AT&T and T-Mobile want those rules to be changed going forward.
The bidding patterns of Dish and its DEs "indicate this coordinated conduct went well beyond the activity engaged in by bidders that participate in typical bidding agreements or bidding consortia, in which smaller bidders pool their money and form a single entity to buy spectrum. Instead, the data show that Dish and the DEs frequently placed identical bids for the same amount on the same licenses," Verizon noted.
"These patterns are unlikely to have occurred by chance (if, for example, they were making independent decisions as to when, where and how much to bid)," Verizon continued. "The data also reveal that coordinated bidding allowed Dish to exit the auction abruptly once bidding reached a certain level without risk, because the DEs bid on top of it. Switching licenses from Dish to its DEs not only relieved Dish of liability for any payments--it also reduced the group's overall payment liability through the use of DE bidding credits, which ultimately saved it (but cost taxpayers) $3.3 billion."
Verizon said it agrees with AT&T and T-Mobile that the FCC should change its rules "to prohibit collusive joint bidding arrangements in order to ensure that the abuses in the AWS-3 auction do not reoccur."
Specifically, Verizon thinks members of a bidding consortium or other joint bidding arrangement "must submit bids through a single applicant that is identified on their short-form application, and cannot bid themselves during the auction."
- see this FCC filing
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