Furchtgott-Roth Says Roaming Exclusion Hurts Spectrum Value
FCC inaction on a roaming “home market exclusion” devalues spectrum licenses, former Commissioner Harold Furchtgott-Roth said in a report commissioned by T-Mobile. T-Mobile’s filing came on the sixth day of the 700 MHz auction. Carriers seeking a change in that rule had hoped for agency action before the auction began.
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The rule’s practical impact is that another carrier need not honor a roaming request by a counterpart with spectrum in a particular market, even if that spectrum is not cleared for use, a process that can take years. The T-Mobile filing is especially significant in that Chairman Kevin Martin worked for its author when he serve on the commission, sources said.
The roaming order “discourages firms from holding FCC wireless licenses,” Furchtgott-Roth wrote. “Parties that hold Commission licenses or ’spectrum usage rights’ uniquely lose roaming rights. The obvious result is a discouragement of holding Commission licenses.” Though Furchtgott-Roth did not make explicit mention of the 700 MHz auction, he wrote that the rule threatens harm to spectrum auctions in general: “The Roaming Order may lead some licensees to seek to sell or lease their licenses (or at least their ’spectrum usage rights') in order to obtain favorable roaming rights rather than hold licenses (or ’spectrum usage rights') and lose those favorable roaming rights.” The order most benefits entities “that hold fewest licenses and have the fewest facilities,” he said.
The FCC approved the home market exclusion to encourage carriers to build out spectrum licenses they hold rather than rely on roaming contracts. That effect may not occur, said Furchtgott-Roth. “Even without the home market exclusion of the Roaming Order, licensees today already have substantial incentives to build-out their licenses not merely to meet the requirements of those licenses but to better serve their own customers often at lower costs,” he said. “With these incentives already in place, operators who previously have chosen not to build out infrastructure likely have done so for a good financial reason: the marginal net benefit of building out does not exceed the marginal net benefit of the next best alternative.”
Last year, Leap Wireless, MetroPCS SpectrumCo, Sprint Nextel, and T-Mobile asked for roaming rule reform, especially elimination of the in-market exclusion (CD Oct 2 p5). The petitions found a receptive audience on the eighth floor, but Martin has yet to circulate an order (CD Nov 8 p1).