T-Mobile US quickly countered claims by rival AT&T that rumored plans by the Federal Communications Commission to slice up a majority of spectrum for the upcoming AWS-3 auction into economic-area-sized chunks was best for the wireless industry.
In a blog post entitled “Size matters,” T-Mobile US VP of regulatory affairs Kathleen Ham notes:
“One of the most important components in designing a successful spectrum auction is establishing the right license sizes – both the amount of spectrum devoted to each license and the geographic area it covers. As history shows, providing enough small blocks and a mix of geographic areas will help ensure the auction does not become a playing field for only Verizon and AT&T.”
Ham then goes on to explain that T-Mobile US would like to see the FCC provide a more even mix of large- and small-sized licenses, which she claimed would provide “the greatest opportunity for a wide variety of bidders to participate and obtain licenses that match their licensing needs.”
“Because AWS-3 spectrum will be used by many wireless carriers to complement their existing AWS-1 spectrum holdings, T-Mobile has argued that it makes sense to have a mix of license sizes that mirror, to the extent possible, the AWS-1 license areas – smaller cellular market areas (CMAs) and larger economic areas (EAs),” Ham said.
AT&T earlier this week noted in its own policy blog post that it was throwing support behind rumored plans for the FCC to include up to 40 megahertz of a planned 50 megahertz of paired spectrum set to be auctioned in the 1.7/2.1 GHz advanced wireless service band in EA-sized chunks. The remaining 10 megahertz of paired spectrum is reportedly set to be set aside in CMA chunks. The FCC’s plans for EA licenses currently splits the country into 176 markets, while the CMA license plan counts 734 markets.
Ham also countered claims by AT&T that larger grouping of spectrum and geographic areas encourage higher spectrum bids.
“AT&T is wrong for several reasons,” Ham noted. “First, with respect to license area, AT&T inappropriately compares the revenue generated from AWS-1 [regional economic area grouping] licenses and CMA licenses to show that larger license sizes should be preferred. However, the FCC is not considering the use of REAGs in this auction.”
Ham claims a better comparison would come from the A- and B-Block licenses auctioned in the AWS-1 proceedings, which included that included the same amount of spectrum, but in different license sizes. Comparing those numbers showed that the EA-sized licenses did indeed pull in higher bids than the CMA-sized licenses, though at a smaller gap than what AT&T was showing in its argument.
Smaller wireless carriers have been pressing the FCC to provide CMA-sized spectrum licenses, claiming they need access to licenses that cover their smaller markets and to not include larger cities that they have no interest in competing against larger operators in. Speaking at last fall’s Competitive Carriers Association event, Cellcom CEO Pat Riordan explained that if the FCC goes with EA-sized licenses, it would be forced to bid on a license encompassing Green Bay, Wisc., which is a market that will garner intense interest from larger rivals and may not be a market it’s interested in entering with that spectrum.
A similar argument was put forth by Ron Smith, CEO of Kentucky-based Bluegrass Cellular, who noted EA-based license sizes would force the carrier to acquire spectrum in larger markets outside of its current rural footprint.
“The license sizes have to be at a level where I can at least participate,” Smith said. “I serve between large markets. If we go with EAs, I just can’t afford to buy or enter large markets. … We all want to participate and are just asking for auction rules that will allow that.”
Riordan also noted that he was not buying claims by larger rivals that the number of licenses put forth by CMA rules would be too complicated, explaining that if a small carrier could handle the process, he was pretty sure larger carriers would be able to manage.
“This is not too complicated for Verizon or the FCC,” Riordan said.
Spectrum slices
In addition to license sizes, Ham argues that the FCC should look to include a greater ration of smaller spectrum slices in the AWS-3 proceedings. The AT&T claims indicate that most of the spectrum up for bid will include 20 megahertz of spectrum per license (10×10 megahertz), with only a single license including a smaller 10 megahertz block (5×5 megahertz).
AT&T noted that the 20 megahertz block acknowledges the spectrum efficiency in running LTE services in a 10×10 megahertz channel, thus providing for higher network speeds and efficiency. One only needs to look at the reported speed variations between LTE deployments by Verizon Wireless, AT&T Mobility and T-Mobile US, which include 20 megahertz of total spectrum with that of Sprint’s 10 megahertz LTE network.
Ham said that the FCC should include just one license with 20 megahertz of spectrum, with the remaining 30 megahertz of spectrum split into smaller 10 megahertz chunks. In making that point, Ham brings in T-Mobile US’ request for spectrum aggregation limits focused on the sub-1 GHz band and that Verizon Wireless and AT&T Mobility, both of which are the targets of the spectrum aggregation limit proposal, would benefit from having smaller spectrum chunks in order to fine tune their spectrum holdings.
“As the FCC considers this ‘Goldilocks’ choice, it should keep in mind that neither bigger nor smaller is always better,” Ham concluded. “Rather, if the spectrum block and geographic area sizes are just right, the auction will surely be a success.”
Analysts expect the FCC to potentially come out with rules for the AWS-3 auction by the end of the month.
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