AT&T Scores a Win as Qualcomm Spectrum Buy Is Approved

Some mixed signals had emanated from the FCC in recent weeks on the Qualcomm deal, which Chairman Julius Genachowski recommended be approved a month ago (CD Nov 23 p1). Copps and Commissioner Mignon Clyburn had raised objections. But in recent days approval had appeared all but inevitable, since Genachowski had already voted for the sale on the commission’s electronic voting system and it had the support of Commissioner Robert McDowell. With Copps about to leave, Genachowski needed only one additional vote on what will be a three-member FCC in the early part of 2012, until the Senate acts on the nominations of Ajit Pai and Jessica Rosenworcel to fill the open seats.

Copps’s said the FCC got things wrong in not imposing a requirement that AT&T abide by the 700 MHz interoperability requirement sought by small carriers (CD Dec 13 p1). Both Copps and Clyburn had been urging that this condition be part of the order. “Despite evidence of, and support for, the need for an interoperability condition in the record -- and efforts to develop such a condition -- today’s 100 paragraph item devotes just two sentences to justifying why such a condition is inappropriate,” Copps said (http://xrl.us/bmmriq). “That justification is not consistent with conditions the Commission has imposed on previous acquisitions."

Clyburn indicated the issue was a key reason she concurred rather than voted for the order outright (http://xrl.us/bmmriw). “For me, the lack of interoperability in the 700 MHz band was the most challenging issue in this proceeding,” she said. “I am very concerned that the 700 MHz band, which holds so much promise because of its excellent propagation characteristics, has become the only mobile wireless band without a unified band plan. We have to make progress on this issue to fully deliver on the promise of mobile broadband for all Americans.”

The order recognizes that 700 MHz interoperability is an issue that should be studied further and commits the FCC to seeking further comment on a fast-track schedule (CD Dec 23 p1). “We believe the better course would be to consider the numerous technical issues raised by the lack of interoperability through a rulemaking proceeding, and we plan to begin such a proceeding in the first quarter of next year,” the order said (http://xrl.us/bmmrhp). “For these reasons, we find that it would not be appropriate in the context of this transaction to mandate as a condition of the license transfers that AT&T may only use devices that are interoperable across the lower 700 MHz band.”

AT&T had asked the FCC to seek public comment on its latest version of a spectrum “screen,” following the discussion of the screen in the staff report on the AT&T/T-Mobile transaction, which took in less spectrum in calculating the screen than some past deals. But that request had little support at the FCC. Instead, the FCC said it would revisit the screen, as need arises, but not seek comment.

"Because under any version of the overall spectrum screen relatively few, or no, local markets are triggered for further competitive analysis, we determine that there is no need to formally address what spectrum should be included in the Commission’s spectrum screen at this time,” the order said. “We anticipate that as we consider the input market for spectrum in future transactions, revisions to the screen may be necessary.” But the order goes on only to discuss a possible downward move in the screen, suggesting that the Specialized Mobile Radio (SMR) spectrum included in the screen could be reduced from 26.5 MHz to 14 MHz “to reflect the relevant portion of SMR spectrum through which mobile broadband service can be provided."

The FCC agreed with commenters who urge that it examine spectrum holdings below 1 GHz as part of a “case-by-case” analysis of the deal. AT&T’s buy of additional 700 MHz spectrum “raises some competitive concerns,” the order said. “Post-transaction, AT&T would hold a significant proportion of the available spectrum suitable for the provision of mobile voice or broadband services, particularly below 1 GHz spectrum, that has technical attributes important for other competitors to meaningfully expand their provision of mobile broadband services or for new entrants to have a potentially significant impact on competition.” But the FCC also said the potential harm can be mitigated with “certain targeted conditions to help prevent anticompetitive harm."

Copps said the analysis of spectrum below 1 GHz is “a step in the right direction” for the FCC. But he said at the same time the order drew some conclusions that gave him pause. “AT&T’s acquisition of the Qualcomm spectrum would give the company more than one-third of below-1 GHz spectrum nationwide measured on a MHz/POPs basis,” he said. “Using that same metric, AT&T and Verizon Wireless combined would nationwide hold approximately 73 percent of below 1 GHz spectrum.” The order “falls short in identifying and imposing conditions that would tip the deal in favor of the public interest, and it moves us farther down the road toward a wireless duopoly."

The order does impose conditions designed to mitigate potential competitive harm. The order mandates that AT&T cannot incorporate the Qualcomm spectrum into its network in a way that works against data roaming. “For example, if AT&T bonds the Qualcomm spectrum with AWS-1 spectrum, AT&T cannot use that bonding as a basis to decline to offer roaming to providers offering service on AWS-1 spectrum,” the order said. “We condition our approval of this transaction on the requirement that AT&T may not configure its network so that the supplemental downlink technology creates a barrier to roaming under the Commission’s existing roaming rules."

The order also addresses interferences issues. The FCC requires AT&T to abide by the same power limits and antenna height restrictions that apply to lower 700 MHz A- and B-block licenses in using the Qualcomm spectrum. The AT&T also requires AT&T to use the spectrum only for downlink transmissions “consistent with its statements in support of this application.” And the order requires AT&T to coordinate with other 700 MHz licensees to avoid interference and to quickly take steps to address problems if they occur. The “immediate adjacency” of the C-block poses the most risk of harmful interference, the order said.

"This spectrum will help AT&T continue to deliver a world-class mobile broadband experience to our customers,” said Senior Vice President Bob Quinn. “We appreciate the FCC Chairman, the Commissioners and their staff for completing its review before the holidays."

Rural Carrier Concerns Remain

Rural Cellular Association President Steve Berry said Copps was “right on the money” in his criticism of the order for not imposing a 700 MHz interoperability mandate: “We are optimistic that the FCC recognizes the importance of interoperability. We hope an expedited rulemaking proceeding, beginning early next year, will mean real progress in full utilization of the 700 MHz band and enhance competition while bringing consumers greater choice for 4G mobile broadband. Each day that passes without interoperability jeopardizes the survival of competitive carriers and continues to hold billions of dollars of investment on the sidelines.”

The FCC’s failure to mandate 700 MHz interoperability in the order “will have harmful consequences for competition and American consumers,” warned C Spire Vice President Eric Graham. “AT&T continues to do everything within its power over the Lower 700MHz spectrum to delay or prevent 4G LTE competition from emerging within the band.” The Rural Telecommunications Group was pleased the FCC committed to a rulemaking notice on interoperability issues. The order also recognizes “that the new Lower 700 MHz Band airwaves that AT&T is inheriting are valuable, add to AT&T’s already deep spectrum holdings, and assist AT&T in maintaining its already large market share,” RTG said.

"The AT&T-Qualcomm transaction has brought to light the important need for interoperability and the feasibility of implementing it across the Lower 700 MHz paired spectrum,” said Vulcan Wireless, which has been active on the issue. “Interoperability is essential for equipment availability as well as continued investment, jobs and competition in the wireless industry. Vulcan Wireless is pleased that the FCC recognized the importance of interoperability by including conditions on the transaction and committing to a rulemaking, which we expect the FCC to put on a fast track."

"When it comes to spectrum, want and need are two very different things,” said Free Press Policy Director Matt Wood. “AT&T obviously wants more spectrum for itself, and less for potential competitors, but it doesn’t need this spectrum to improve its own offerings. As the commission’s exhaustive review of the AT&T/T-Mobile transaction proved, AT&T can and should upgrade its own networks to provide better service to customers.”