FCC Says 2015 Spectrum Auction Isn't Just for the Big Guys
The FCC may be on the front pages for its take on net neutrality, but agency regulators quietly voted in a rule Thursday for the 2015 spectrum auction that has major telecom companies AT&T and Verizon steamed. Why? They won't be able to buy as much spectrum as they'd probably like.
The FCC decided to put its foot down and reserve a certain amount of low frequency bandwidth during next year's spectrum auction. The move is designed to help smaller carriers with fewer low frequency holdings not get shoved out of the U.S. wireless market.
Low frequency bandwidths are valuable because they permeate further and allow a carrier to expand with less cost. They do not work better in dense urban areas, however. At stake is the coveted 600Mhz spectrum. The lowest currently in use by U.S. wireless carriers like AT&T. Verizon, Sprint, and T-Mobile is 700Mhz.
But it's not set in stone. For starters, the bidding has to raise "enough spectrum and revenue to help fund a new $7 billion public safety network" and help pay back the TV stations that offered up the airwaves up for auction. The move would then set aside 30MHz for smaller carriers -- in this case, mostly for Sprint and T-Mobile. According to a Reuters report, AT&T says it plans on spending $9 billion on its own for 20MHz.
Naturally, this has ruffled the feathers of those with deep pockets, namely AT&T and Verizon. When the rules first leaked out, both AT&T and Verizon appeared troubled at having the auction regulated. AT&T initially threatened to back out of the auction, but quickly retracted its statement.
"Sprint and T-Mobile had their own opportunities to acquire low-frequency spectrum, but they consciously chose not to, purely for reasons of business strategy," AT&T stated in a May FCC filing.
T-Mobile, the No. 4 national U.S. wireless service provider behind AT&T, Verizon, and Sprint in that order, naturally doesn't agree.
"AT&T is missing the point," T-Mobile's vice president of federal regulatory Kathleen Ham responded. "Competitions matters. The rules the FCC is proposing are designed to benefit consumers in a wireless marketplace dominated by AT&T and Verizon."
There's also another elephant in the room: a merger between Sprint and T-Mobile. The FCC spectrum rules based on the current U.S. wireless market, and should the bottom two carriers consolidate, the rules would have to change to accommodate the increased finances and scale of the new, combined company.
Sprint parent company, the Japan-based SoftBank Corp., has been making its intentions clear in the last few months. SoftBank chief executive and Sprint chairman Masayoshi Son in particular has been vocal about why Sprint and T-Mobile should be allowed to join forces, despite opposition from the FCC and the U.S. Department of Justice's antitrust division. Approval from both institutions is needed, although both have expressed concern that consolidating the U.S. wireless market from four to three could hurt consumers -- a claim repudiated by some analysts.
"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."
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