AT&T: FCC Aggregation Limits Could Drive Telco from Auction

Says it would have to rethink where best to invest
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AT&T has warned the FCC that if it limits the amount of low-band spectrum in the broadcast 600 MHz spectrum band incentive auction, it could put the company in an untenable position and jeopardize its participation in the auction.

The FCC is widely expected by next week to circulate an item with changes to its local market spectrum screen that would include limits on low-band spectrum holdings in individual markets.

In a meeting earlier this week with Renee Gregory, legal advisor to FCC Chairman Tom wheeler, AT&T VP, federal regulatory, Joan Marsh, said that as the company understood the item, after a certain aggregate threshold is reached in the broadcast spectrum auction, certain bidding restrictions will be imposed on anyone with more than a third of available low-band spectrum. That, said AT&T, would restrict its participation in markets covering 70% of U.S. POPs ("POPs generally refers to the number of people in a specific area where wireless services are available [the population],”) according to CTIA: The Wireless Association. Verizon would be in the same position of being restricted in many markets.

According to AT&T, the FCC item does not define when that threshold for restrictions would be triggered in the auction, leaving that for a subsequent order. She also said the restrictions are "complicated and unnecessary" and would suppress revenue from the auction.

"By precluding AT&T and Verizon from even bidding for certain blocks, the proposal would essentially create a set aside that eliminates real bidding competition for the benefit of the favored non-restricted companies," she said, according to an ex parte filing with the FCC.

Marsh saved the sting for the tail end of her discussion of the potential problems with the spectrum screen.

"AT&T could either participate in the auction, accepting that it will likely obtain only a fragmented and inefficient 600 MHz footprint, or it can choose to withhold its capital for other investments and sit out of the auction entirely."

That would be a first, she said. "AT&T has never declined to participate in a major spectrum auction and certainly did not intend to do so here, where capital contributions will be needed across the wireless industry for a successful outcome. But if the restrictions as proposed are adopted, AT&T will need to seriously consider whether its capital and resources are directed toward other spectrum opportunities that will better enable AT&T to continue to support high quality LTE network deployments to serve its customers."

The FCC does not want to discourage participation, but has signaled it also does not want low-band spectrum concentrated in too few hands. The FCC has three auctions in which to raise funds for FirstNet, the interoperable broadband communications network, and to recoup the expenses of the auction and pay broadcasters for clearing off spectrum, though statutorily it is only obligated to cover the auction costs and pay broadcasters for their spectrum or the expense of moving and repacking them to make room for wireless carriers bidding for that broadcast spectrum.

It had already raised $1.564 billion toward FirstNet in the H Block auction earlier this year--Dish got that spectrum. And is selling AWS-3 spectrum later this year. FCC officials have said they expect to pay for most or all of FirstNet with proceeds from those first two auctions, lessening the pressure on the third, broadcast incentive auctions, targeted for 2015.

NTCA: The Rural Broadband Association, representing smaller telecoms that could benefit from restrictions on AT&T and Verizon, countered that AT&T was just trying to threaten the FCC into not upsetting its business plans.

“It is unfortunate to see AT&T resort to a thinly veiled threat of not participating in the upcoming 600 MHz incentive auction to seek out policies favorable to its business plan," said NTCA CEO Shirley Bloomfield. "It’s important, however, that the Commission balance various competing concerns for the licensing of a limited public resource — especially one that has as much value as this low-band spectrum that AT&T and many others clearly desire.

"Reasonable limitations on spectrum aggregation are necessary to ensure that this valuable public resource is put to work as soon as possible for the benefit of consumers in as many areas as possible, rather than permitting a few large bidders to sweep up the vast majority of spectrum and deploy it on schedules and in markets of their choosing. Such policies would not create ‘preferred carriers’ in this auction, but would only help to level the playing field for the benefit of consumers in all areas.

"AT&T clearly recognizes the value of low-band spectrum, and reasonable limitations would not preclude it from participating in this auction. To the contrary, AT&T would be well-positioned to combine the sizeable amount of spectrum it could obtain in this auction, even under such limitations, with its already sizeable holdings in other bands. Protests of a ‘fragmented, uneconomic and inefficient 600 MHz footprint’ are therefore unwarranted and miss the mark.”

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