Verizon, T-Mobile's Legere knock each other in 600 MHz spectrum reserve fight

Verizon Communications (NYSE: VZ) shot back at T-Mobile US (NYSE:TMUS) CEO John Legere, who delivered a broadside at Verizon and AT&T Mobility (NYSE: T) in his ongoing lobbying effort to get the FCC to set aside more spectrum for smaller carriers to bid on in next year's incentive auction of 600 MHz broadcast TV spectrum.

"There's some serious s-- about to go down in DC, and if you're one of the 180 million Americans using a smartphone and you're not pissed off right now, then you're not paying attention, but you need to," Legere said in a video published on the company's blog yesterday.

Legere wrote in a blog post and said in a video that consumers should be angry about the way the current state of the FCC's rules, which will set aside up to 30 MHz of spectrum, depending on the market, for smaller carriers to bid on in the auction. Since last summer T-Mobile has pushed for that amount to be at least 40 MHz, arguing that without that rule smaller carriers won't get enough low-band spectrum to level the competitive playing field with Verizon and AT&T, which control around 73 percent of the spectrum below 1 GHz.

Reuters reported in late May that the FCC staff is leaning against increasing the size of the spectrum reserve from 30 MHz to 40 MHz or more. The FCC has said no final decisions have been made. T-Mobile is not letting up on its own lobbying on the issue and Legere said that next month the FCC will likely vote on final rules for the auction.

"T-Mobile has made no secret of the fact that we want and need more low-band spectrum," Legere said. Indeed, T-Mobile spent much of last year acquiring 700 MHz A Block spectrum, including a huge swath from Verizon, and has been busy deploying that in an effort to cover 300 million POPs with LTE by year-end. However, T-Mobile is pushing for more low-band spectrum to expand its rural footprint and improve its inbuilding coverage.

"In rural areas, people are stuck with only dumb and dumber to choose from," Legere said, referring to Verizon and AT&T. "But if we can get more low-band spectrum and we can steal just 15 percent of the market from AT&T and Verizon, we will save consumers money and put $1 billion back into consumers' pockets." 

"Whether you're a T-Mobile customer or not, this issue directly affects you. It's time for all of us to make some noise," Legere said, urging people to contact the FCC about the issue.

In response, Verizon chided the often-profane Legere for his language, and wrote that "Mr. Legere is simply wrong."

"As we've said before, T-Mobile is more than welcome to participate in any auction the FCC holds," Verizon wrote in a blog post. "No company can prevent another from participating. The last time large swaths of low-band spectrum came to auction in 2007, for example, T-Mobile could have participated. It chose not to.

The spectrum reserve, which was crafted as a compromise last year among the FCC's three Democratic commissioners, is designed to let carriers with less than 45 MHz of spectrum below 1 GHz in a given market bid on the spectrum in that market. The move essentially prevents Verizon and AT&T from bidding on reserved 600 MHz spectrum in most markets.

Verizon wrote that "some companies can attempt to bake rules into an auction to prevent other companies from participating fairly and squarely in the auction. And here, Mr. Legere and T-Mobile are actually doing whatever they can to push companies like Verizon out of the auction."

Verizon noted that T-Mobile's parent company is Deutsche Telecom and has a market capitalization of $76 billion, and that Sprint's (NYSE: S) parent company Softbank, has market capitalization of about $70 billion. 

"In other words, these aren't 'small' companies," Verizon wrote. "This set aside also comes at a time when T-Mobile is rumored to be in early talks with Dish on a merger that would give them the combined company more than double the per-customer capacity of Verizon – if it actually deployed it on a network (something Dish has yet to do despite its massive spectrum holdings)."

"Yet Mr. Legere was in DC, hat in hand, asking that more discounted spectrum on the taxpayer's dime be included in the set-aside. We think this is a bad idea," Verizon wrote. "Others think this is bad public policy. Others more think such set-asides that hinder other companies from meeting their customer demand set a bad precedent. The FCC doesn't need to give additional handouts to global companies with the financial wherewithal to compete. Nor should it be handing out discounted spectrum to companies with a track record of not investing in networks or serving consumers."

T-Mobile's argument is that a reserve of 30 MHz of spectrum would let smaller carriers bidding on that spectrum acquire only one 10x10 MHz configuration, which most regard as essential to strong LTE deployments. T-Mobile argues that Verizon and AT&T would then be able to split the remaining 40 MHz of non-reserved spectrum evenly between them. 

For more:
- see this Verizon public policy blog post
- see this T-Mobile blog post
- see this Re/code article
- see this CNET article

Related articles:
T-Mobile keeps lobbying FCC to increase size of 600 MHz reserve
Report: T-Mobile, Sprint won't get extra 600 MHz reserve in FCC auction
Sprint's Euteneuer: We're looking at 600 MHz auction, but don't need to participate
FCC moving forward with basic 600 MHz auction framework, but spectrum reserve remains unclear
Sprint, T-Mobile, Dish join forces with others to press FCC on incentive auction rules
Sprint's Claure suggests bidding coalition with CCA members for 600 MHz spectrum