AT&T Threatens to Boycott Spectrum Auction Over Proposed Rules

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Next year, the Federal Communications Commission will host an auction for airwaves that are currently unused but are owned by television broadcasters. In effect, the auction would open up this portion of the spectrum for wireless carriers, which could use it to provide better service and faster Internet speeds to their customers. However, the FCC has proposed rules for the auction that would reserve some licenses for smaller companies. And AT&T (NYSE:T) – a big company — is not happy.

AT&T is so unhappy, in fact, that it’s started a public campaign against the proposed rules. In a filing to the FCC, AT&T said that if the rules restricting which licenses it can bid on are put in place, it won’t participate in the auction at all. In the letter, AT&T’s vice president of federal regulatory issues, Joan Marsh, wrote that the proposed bidding limits on large carriers “would put AT&T in an untenable position, forcing AT&T to reevaluate its potential participation in the auction.”

Marsh continued: “AT&T has never declined to participate in a major spectrum auction and certainly did not intend to do so here. But if the restrictions as proposed are adopted, AT&T will need to seriously consider whether its capital and resources are directed toward other spectrum opportunities that will better enable AT&T to continue to support high quality LTE network deployments to serve its customers.”

Most commenters seem to think AT&T is bluffing, and that the company would never sit out of such an important auction and allow competitors like Verizon (NYSE:V) and Sprint (NYSE:S) to scoop up so much valuable space on the spectrum. The spectrum only has a limited amount of space available, and the FCC determines how the different parts of it can be used. The parts of the spectrum up for auction next year are particularly valuable because of their strength and reach.

The Washington Post reports, “On the one hand, the prospect of an AT&T boycott should have regulators worried — the FCC stands to lose millions if not billions of dollars in revenue from AT&T if it backs out — but it’s hard to see how AT&T could justify passing up a rare opportunity to purchase some of the most valuable aerial real estate in the industry.”

AT&T’s specific issue has to do with the size of the chunks of spectrum it would be allowed to bid on. According to the company, “a 10×10 MHz allocation is necessary to achieve minimal economic and technical efficiencies in an LTE deployment.” If AT&T can only bid on chunks smaller than that, those chunks won’t be useful.

The company said: “In short, in all band plans less than 70 MHz, restricted bidders — specifically AT&T and Verizon (and in a small number of markets, potentially US Cellular or CSpire) — would be limited to bidding for only 3 blocks. And in each market where the restrictions attach to at least two carriers, at most only one restricted carrier could emerge from the auction with a 10×10 MHz allocation.”

So it’s a complicated issue, but AT&T may have a point if what it says is true. It will be interesting to see how the FCC responds.

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