Large, Small Wireless Carriers Clash Over Spectrum Screen, Holdings Evaluation in Auction Proceeding

Verizon Wireless asked the FCC to reaffirm the use of a single spectrum screen that operates as a safe harbor. There’s no need for new rules or new screens, the carrier said (http://xrl.us/bn9xpp). Verizon Wireless said the spectrum screen “should be corrected to include all spectrum suitable and available for mobile services,” including mobile satellite service, educational broadband service and remaining Broadband Radio Service spectrum. The FCC should update the amount of spectrum included in the screen “to reflect the reality that the screen does not today include a substantial amount of spectrum ... all of which is suitable and available for mobile services and much of which is already in use,” the company said.

AT&T said competition and consumer welfare would be harmed by implementation of a screen that applies different weights to different spectrum and by a cap applied specifically to spectrum below 1 GHz, and one that applies only to spectrum sold via auction (http://xrl.us/bn9xp9). It also opposed Free Press’s “proposed 35-percent cap combined with an HHI-based screen for transactions not triggering the cap.” HHI refers to the Herfindahl-Hirschman Index, a commonly used measure of market concentration. Proposals for a cap on auction purchases are unworkable and against the public interest, AT&T said. Applying one set of rules to auctions and another to private negotiations simply creates arbitrage opportunities, it added.

Verizon also is against a flat cap, it said: The screen is “fully capable of flagging competitive issues that may result from spectrum aggregation, without the distorting and overboard restrictions inherent in a cap."

Sprint and T-Mobile held the approaches of Verizon Wireless and AT&T are anti-competitive. The approach of the top two U.S. carriers “would frustrate the commission’s ability to promote the public interest and should be rejected,” T-Mobile said (http://xrl.us/bn9xqd). The absence of caps “will likely deter broad participation by enabling the largest carriers to dominate an auction” and potentially enable them to prevail in an auction “at a lower price than they would have paid in a more competitive auction,” it said. Spectrum auction caps don’t inhibit auction participation, it said: Evidence suggests that caps “encourage auction participation and potentially drive higher auction revenues."

T-Mobile also said it supports having spectrum aggregation limits “to ensure that the mobile wireless market is competitive.” There are material differences between the ability to use spectrum above and below 1 GHz “that require the commission to separately evaluate a carrier’s spectrum holdings below 1 GHz,” it said. The record in this proceeding shows that spectrum below 1 GHz “plays an especially important role as wireless providers seek to compete effectively in the marketplace,” Sprint said (http://xrl.us/bn9xqu). The dramatic growth in broadband services and technologies and other proceedings including the 800 MHz band reconfiguration order, “have dramatically changed the way carriers view the value, utility and desirability of commercial spectrum bands,” it said: Focusing “only on the amount of spectrum a carrier can access misses the mark."

The bidding strategies of AT&T and Verizon Wireless in past spectrum auctions suggest they'll act similarly “to protect their share of low-band spectrum in the upcoming 600 MHz TV spectrum incentive auction,” said Sprint. The auction may well be the only opportunity for other competitive carriers to acquire low-band spectrum for the foreseeable future, it said.

Free Press supports establishing caps on overall spectrum holdings and sub-1 GHz spectrum holdings. These holdings, set at a level slightly higher than the existing 33 percent screen, “would preserve a floor of competition,” it said (http://xrl.us/bn9xsu). The group said treating the 33 percent screen as an unchallengeable safe harbor would open the door “to mergers that clearly raise enough competitive concerns to warrant scrutiny.” Creating a safe harbor at a level higher than 33 percent, as AT&T requests, “would result in the pre-blessing of mergers that the commission and the department of justice have already rejected,” the group added. U.S. Cellular said it supports reasonable restrictions on spectrum acquired at auction. Competition requires competitors, and “permitting monopolization or duopolization of newly available spectrum is not the way to preserve it,” it said (http://xrl.us/bn9xs2). The carrier said it agrees with AT&T and Verizon Wireless that the screen should be a safe harbor for transactions which do not exceed it.

Public Knowledge reiterated its support for weighting spectrum by frequency. Doing so will allow the FCC “to know how important different spectrum frequencies are to carriers and how acquiring a certain amount of spectrum will prevent competition in the market,” the group said (http://xrl.us/bn9xr5). The FCC will have a more effective screen “that prevents a carrier from limiting the competition in a wireless market by acquiring too much of a certain type or types of spectrum,” Public Knowledge said. If the FCC implements a cap, there will be a widespread view “that acquiring spectrum below the cap is a ’safe harbor,'” it said. This view isn’t aligned with the purpose of either a screen or cap, “nor is it aligned with competition policy,” the nonprofit said. “The commission should not allow anticompetitive spectrum transactions even if they fall below a cap.”