Proposed Spectrum Aggregation Rules ‘Complicated and Unnecessary,’ AT&T Says

FCC officials said Wednesday Wheeler is expected to circulate the service rules for the auction Thursday, with the spectrum aggregation rules to follow on April 24, which is three weeks before the commission’s May 15 open meeting. FCC commissioners are already raising some concerns about the size of a proposed set-aside, one agency official said.

"I explained that we had significant concerns with this proposal, both conceptually and in its specifics,” Marsh wrote. “For example, I noted that staff’s proposal does not define the threshold for initiation of the restrictions, instead deferring this determination to a subsequent order. But unless the threshold is defined at a significant and material level, non-restricted bidders could get spectrum at a discount that the FCC cannot afford to give in this auction."

Marsh called the restrictions “complicated and unnecessary” and said they could undermine competition and suppress bidding. “I also advised Ms. Gregory that such restrictions would put AT&T in an untenable position, forcing AT&T to reevaluate its potential participation in the auction,” Marsh said. “While the restrictions vary by band plan, in a 60 MHz band plan a full 50 percent of the blocks (3 out of 6) would be set aside for non-restricted bidders. And with a 50 MHz band plan, 40 percent of the blocks (2 out of 5) would be set aside for non-restricted bidders. Even with a 70 MHz band plan, 42 percent of the blocks (3 out of 7) are set aside."

The House has already weighed in. On Friday, 78 House Democrats urged the FCC not to impose spectrum aggregation limits before the auction (CD April 15 p5).

"This is simply more of the same from AT&T,” said Steve Berry, president of the Competitive Carriers Association. “The FCC is trying to create a pro-competitive auction that gives every carrier an opportunity to bid on and win much needed interoperable spectrum. Using a bright-line limit of the amount of spectrum any one carrier can acquire, after achieving sufficient competition in the auction, is one way to foster competition. Another way to address current inequities is to use a nationwide MHz per pop weighted spectrum screen, as one of the options CCA has proposed."

AT&T and Verizon own almost 80 percent of low-band spectrum nationwide, Berry said. It’s “a fact that AT&T time and again tries to downplay by claiming that low-band spectrum isn’t that much different from high-band spectrum despite its continuing attempts to aggregate low-band spectrum,” he said. “AT&T’s letter today fails to recognize that carriers can aggregate across spectrum bands, so AT&T could in fact use spectrum in its current portfolio at 700 MHz and aggregate at 600 MHz. With the right incentives, the FCC could realistically clear 70 MHz of spectrum in the incentive auction, which would allow AT&T to access up to 40 MHz of unreserved spectrum. That’s a lot of spectrum, especially 600 MHz spectrum, considering the superior propagation characteristics.”

But NAB Executive Vice President Rick Kaplan, former chief of the FCC Wireless Bureau, said the AT&T filing is a cause for concern. “After reading AT&T’s letter, it looks like the FCC is poised to drive down values in not only the H block auction, but also the incentive auction,” he said. “I just hope it doesn’t render this whole process a massive waste of everyone’s time. At least the AWS-3 auction should fund FirstNet.”

"The FCC gets an A+ on transparency but we hope they listen to the strong ... congressional call to let market forces, not clever economists’ schemes, drive the results of the auction,” said Preston Padden, executive director of the Expanding Opportunities for Broadcasters Coalition. “Complicated ’scoring’ of stations in the reverse auction and complex bidding restrictions in the forward auction threaten the clear congressional goals of reallocating spectrum and generating serious auction revenue."

"AT&T’s filing shouldn’t come as a surprise,” said Fred Campbell, executive director of the Center for Boundless Innovation in Technology. “The FCC’s proposed restrictions are fundamentally inconsistent with the incentive auction concept. The biggest difference between the incentive auction and previous auctions is that the FCC can’t force incumbent spectrum users to participate. The idea was to give broadcasters market incentives to voluntarily sell their spectrum. But the FCC proposal doesn’t look like an ordinary market. The FCC plan to impose buying limits based on arbitrary price thresholds set by the government is designed to pick winners and losers, not create market incentives. That means broadcasters are unlikely to receive market value for their spectrum and large carriers are unlikely to acquire enough spectrum to deploy efficient 10 MHz LTE channels.” Campbell is also a former chief of the Wireless Bureau.

The FCC seems bent on further complicating the TV incentive auction through its proposed spectrum aggregation rules, said Scott Cleland, chairman of NetCompetition, in a Wednesday blog post. “From the various reports of briefings about the FCC’s planned rules for the 600 MHz incentive auction, two things appear clear,” Cleland said (http://bit.ly/1md3wBD). “First, the FCC doesn’t trust market forces. And second, the FCC doesn’t want the highest bidders to win the spectrum. Apparently, the FCC is trying to produce something for everyone in this now circus-like auction process -- a proverbial, dazzling three-ring-circus of political compromises that catch and keep different people’s attention.”