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Huge stakes involved in FCC's spectrum auction rules

Grant Gross | Aug. 6, 2015
The U.S. Federal Communications Commission will decide this week which mobile carriers will control billions of dollars worth of prime wireless spectrum scheduled to be auctioned next year.

T-Mobile and allied consumer and trade groups called on the agency to reduce the number of conditions necessary before the spectrum reserve is triggered, but the FCC has already given smaller carriers a huge advantage simply by excluding AT&T and Verizon if those conditions are met, AT&T argued in a July 27 filing with the FCC.

Joan Marsh, AT&T's vice president for federal regulatory affairs, called the FCC's auction framework "unprecedented." The FCC proposal gives T-Mobile "special treatment" by letting the carrier purchase large amounts of 600MHz spectrum "free from auction competition at the expense of taxpayers," she wrote. In addition to T-Mobile rivals, taxpayers also stand to lose because the auction revenues will be lower, according to Marsh.

A T-Mobile proposal to remove a condition to trigger the spectrum reserve "seeks to further increase those windfalls," Marsh wrote.

Under the complicated current proposal from the FCC, the full 30MHz spectrum reserve would be set aside for smaller bidders only if the amount of spectrum given up by TV stations is at least 84MHz.

In addition, the FCC has set a low minimum bidding price in the top 40 U.S. markets, and it would require that the auction raise enough money to reimburse TV stations for their spectrum and pay for moving them to new channels.

But T-Mobile, digital rights group Public Knowledge and telecom trade group Comptel have argued that the TV relocation condition would allow Verizon and AT&T to game the auction by cherry-picking spectrum in select cities. In that scenario, the two large carriers would target spectrum in the most desirable U.S. cities and drive off competing bidders before the total bids reach the TV relocation trigger.

"You can get to very extreme prices that would force us out of those markets," said Steve Sharkey, T-Mobile's senior director for chief engineering and technology policy. The FCC's minimum spectrum price target is virtually "meaningless," because the spectrum clearing costs will be likely much higher, he said.

With the AWS-3 auction raising nearly $45 billion earlier this year, its almost certain that the auction revenues will pay for the TV stations' clearing costs, they argue.

The result would leave smaller carriers locked out of several large cities, those groups say. T-Mobile's proposal would create the spectrum reserve if the TV clearing costs are paid for, or if a minimum spectrum price is reached in top markets. The spectrum reserve would be triggered if either condition is met, "whichever comes first," not if both conditions are met, as is the case in the FCC proposal, Sharkey said.

But T-Mobile's proposal puts the auction at risk of not raising enough money to pay TV stations, Marsh said in her July 27 filing. Triggering the spectrum reserve early will drive down prices by excluding the two largest carriers, she argued.


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