Sprint and T-Mobile Merger Could Shake Up the 2015 FCC Spectrum Auction
A merger between Sprint and T-Mobile could set off a chain of events that change the rules for the 2015 FCC spectrum auction, according to recent reports.
The FCC will be auctioning off more airwaves next year, including the highly coveted low-frequency 600MHz spectrum. The current U.S. wireless market, however, is poised to let the big get bigger while the small get left behind, according to many.
Carriers AT&T and Verizon own a vast majority of the U.S. wireless market, and their deep pockets and lobby power allow the carriers to buy up valuable chunks of spectrum. Smaller carriers like No. 3 Sprint and No. 4 T-Mobile, meanwhile, find it hard to upgrade and keep up with their juggernaut competitors.
It's because of this the FCC and chairman Tom Wheeler have proposed that large buyers in the 2015 spectrum auction such as AT&T and Verizon would be limited in terms of how much they could purchase. The FCC would also reserve 30MHz of spectrum for smaller carriers. The proposal has caused AT&T to threaten to drop out of the auction.
The balancing act in its current form is based off "current market structure," a situation that could drastically change if Sprint parent company SoftBank Corp. manages to convince regulators to allow an acquisition of T-Mobile. According to Reuters, "Any changes or proposed changes in that structure that could undermine the goals of the auction would prompt a review and potential edits, said sources briefed on the proposed rules."
The 2015 FCC spectrum auction is likely to lay the framework for the U.S. wireless industry in the years to come thanks to the implications of holding low-frequency spectrums due to their ability to be upgraded and expanded with ease.
SoftBank chief executive and Sprint chairman Masayoshi Son has adamantly argued that the current state of the U.S. mobile market is not conducive to competition. A combined Sprint and T-Mobile company, Son says, could have the capital needed to compete with the juggernauts AT&T and Verizon.
"I brought the network war and price war (to Japan). I'd like to bring that to the States," Son said at the U.S. Chamber of Commerce to industry officials in March.
"I would like to provide an alternative to the oligopolistic situation that two-thirds of American households can only get access to one or two providers. I'd like to be a third alternative with 10 times the speed and lower price."
"If the government wants us to have a competitive environment, you are going to make sure that the duopoly doesn't use their prowess to crush the little guys and have this sub-1 GHz spectrum be moved all to them," said T-Mobile CEO John Legere in an interview on television show Bloomberg West earlier this year.
"We're all going to need better scale and capability. The question starts to be: How do you take the maverick and supercharge it? We either need more spectrum and capability, a lot more investment, or we need consolidation."
Some analysts agree that unless they join forces, Sprint and T-Mobile won't be able to catch up to AT&T and Verizon and offer consumers a realistic third alternative. The U.S. government, however, is wary. Both the FCC and U.S. Department of Justice's Antitrust Department have expressed concerns about consolidating the national mobile carrier market from four to three. Approval from both institutions is needed in order for Sprint to takeover T-Mobile.
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