Reacting to recent reports that the Federal Communications Commission was looking at limiting auction participation by larger operators, AT&T threatened to possibly sit out the FCC’s planned 600 MHz incentive auction, which could lead to lower overall auction revenues.
In a filing with the FCC, AT&T said that rumors of proposed spectrum auction rules limiting the participation of carriers currently controlling more than one-third of spectrum below 1 GHz in markets would prevent the carrier from bidding on licenses covering more than 70% of the U.S. population. Joan Marsh, VP of federal regulatory at AT&T, said such a scenario could see the carrier instead focus its financial means on other spectrum opportunities.
“Such restrictions would put AT&T in an untenable position, forcing AT&T to reevaluate its potential participation in the auction,” Marsh noted in a filing.
AT&T and Verizon currently control a dominate share of sub-1 GHz spectrum assets, which are seen as superior to other spectrum used by wireless carriers higher up the spectrum frequency chart. Published reports this week indicated that the FCC was planning on setting aside some 600 MHz spectrum for smaller operators, preventing the nation’s two largest operators from bidding on those assets.
Citing people “familiar with the matter,” The Wall Street Journal reported that FCC will set aside up to 30 megahertz of spectrum in the 600 MHz band incentive auction process for bidders controlling less than one-third of spectrum below 1 GHz in those markets. That consideration would be triggered once bidding in each market had hit a to-be-determined financial threshold. Other carriers that could be impacted by such a move include regional operators U.S. Cellular and C Spire.
FCC Chairman Tom Wheeler has said he would like to attract as many bidders as possible to the 600 MHz incentive auction, which is scheduled to begin mid-2015.
“All who want to participate in the auction will be able to bid,” Wheeler said in a statement. “In order to assure coverage and competition in rural America it may be necessary to assure no one can monopolize the bidding.”
The FCC is in the process of drumming up support from television broadcasters through a reverse auction process in order to gather spectrum that would then be re-auctioned to telecommunications providers.
Industry Canada recently completed an auction of 700 MHz spectrum licenses that had limits on the number of licenses that country’s three largest wireless carriers could bid on in an attempt to attract more participants in the process and expand competition. The results of that auction had the three largest players all picking up licenses covering most of the country, with spectrum depth ranging from 10 megahertz to 24 megahertz.
AT&T has claimed that for the FCC to meet revenue goals for the 600 MHz incentive auction, which AT&T claims could top $30 billion, the government agency should not limit bidding. Marsh recently noted that for the auction to be successful, the FCC will need to convince television broadcasters to cough up at least 84 megahertz of spectrum, which would provide for 70 megahertz that can then be auctioned to wireless operators. Using the 700 MHz spectrum auction for reference, which garnered nearly $20 billion in bids for 70 megahertz of spectrum, Marsh claims that factoring in relocation costs and any additional funding needed for FirstNet and next-generation 911 services could push the total cost required to run the auction to that $30 billion mark.
Using that revenue mark, Marsh argues that it will take considerable participation of larger operators to meet that funding requirement and that setting aside spectrum or limiting bidding on any license will impact the fund-raising capabilities of the auction.
“The Commission should instead be focused on ensuring that the wireless industry as a whole can raise the $30 billion in auction capital that may be needed to close an 84 [megahertz] auction, especially given capital commitments that will be made for the AWS-3 auction,” Marsh said. “And notably, as we learned with the H-Block auction, there is no guarantee that all major operators will even show up.”
The FCC late last month released partial rules for its upcoming AWS-3 auction that looked to cater to carriers both large and small. Those rules included spectrum licenses to be auctioned off encompassing three 5×5 megahertz options, leaving just a single 10×10 megahertz license covering the country. While the FCC release did not specify the size of geographic size of those licenses, comments indicated that the 5×5 megahertz licenses would include two sized to economic area dimensions and one sized to commercial market area dimensions.
Smaller operators have been pushing for the FCC to carve out sufficient spectrum in smaller geographic areas in an attempt to cater to their more specific coverage needs that generally do not include major markets. CCA has said it would prefer the FCC move forward with CMA-sized licenses, which would include 734 total licenses covering the country. Larger carriers tend to prefer larger license blocks in the EA (176 total licenses) or larger blocks that they claim are easier to manage in an auction format.
However, at the recent Competitive Carriers Association event in San Antonio, smaller operators noted that while they wanted to see limits on participation of larger rivals, they did not want to fully exclude those operators from participating. A number of carriers cited the need to have Verizon Wireless and AT&T Mobility as part of the 600 MHz ecosystem to drive the development of equipment and scale in order to provide that equipment at reasonable costs to all players.
The recently completed H-Block auction raised just over $1.5 billion, with Dish Network running away with all 176 EA-sized spectrum licenses that include 10 megahertz in the upper 1.9 GHz hand.
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