Incentive Auction Will Need to Raise as Much as $30 Billion to Be Successful, AT&T Says

"Some estimate that it could cost up to $30 billion to close an 84 MHz auction -- an estimate that our analysis suggests could very well be correct,” Marsh said. “No one bidder can run a $30 billion table. There is one possible exception -- Google -- but it is focused exclusively on obtaining access to 600 MHz spectrum for free.”

T-Mobile argued “AT&T and Verizon will run the table, but that too seems highly improbable,” Marsh wrote. “The Commission should instead be focused on ensuring that the wireless industry as a whole can raise the $30 billion in auction capital that may be needed to close an 84 MHz auction, especially given capital commitments that will be made for the AWS-3 auction.” Imposing limits on bidding by any carrier “will only exacerbate the $30 billion revenue challenge,” she said. “A set aside is designed to force Verizon and AT&T to bid against each other, thus raising their costs for spectrum, while sheltering T-Mobile and others from bidding competition so they can get their allocations at a discount. It’s easy to see why T-Mobile would like that approach; it’s less easy to defend such market distortions as legitimate public policy.”

T-Mobile Vice President Kathleen Ham fired back. “AT&T has demonstrated admirable consistency in its public comments on the incentive auction -- that somehow sacrificing competition for duopoly is good public policy,” Ham said. “Only an auction with robust competition from multiple bidders of all size will meet revenue objectives and result in a competitive, innovative mobile broadband landscape for the future that benefits consumers.”

"It is undeniable that every competitive carrier needs additional spectrum to meet consumer demand -- no one carrier can meet the 1,800 percent increase in data demand coming over the next several years,” said Competitive Carriers Association President Steve Berry. “Low-band spectrum is critical to every carrier, rural and urban. Consumers have changed the way they use their smartphones and how they use high speed mobile services. If you believe there is an inherent benefit to consumers and the economy from competition, then you would support a competitive auction with smaller geographic-size licenses, so multiple carriers can bid and win licenses ... to ensure one or two massive companies do not walk away with the entire ‘pie.’ The public deserves and expects better than what the duopoly is proposing.” T-Mobile is a member of CCA.

Bidding caps could mean a failed incentive auction, Expanding Opportunities for Broadcasters Coalition Executive Director Preston Padden told us. “Non-uniform bidding restrictions on wireless carriers in the forward auction and non-interference based ’scoring’ of TV stations in the reverse auction would substantially undermine the odds of a successful Incentive Auction."

Mobile Future, with members including AT&T, told the FCC success of the secondary market for spectrum provides evidence against caps in the auction. “Secondary market transactions involving the 700 MHz spectrum won at Auction 73 have benefitted both nationwide and non-nationwide carriers,” said Jonathan Spalter, Mobile Future chairman. “Of the 2,226,852,504 MHz/POPs transferred or assigned since Auction 73, 58.20 percent of those MHz/POPs were acquired by nationwide operators, and 41.80 percent of the MHz/POPs were acquired by non-nationwide operators,” he said in a filing likely to be released by the FCC Thursday. “While T-Mobile did not participate in Auction 73, it has been successful in acquiring 700 MHz spectrum in post-auction transactions. Based on FCC licensing records, T-Mobile already has acquired 95,454,648 MHz/POPs of 700 MHz spectrum from non-nationwide carriers. More recently, it penned a deal with Verizon Wireless by which T-Mobile would acquire all of Verizon Wireless’s 700 MHz A Block licenses.”