FCC Spectrum Auction May Not Include AT&T
April 17, 2014

AT&T May Sit Out Of Spectrum Auction

Peter Suciu for redOrbit.com - Your Universe Online

In a filing with the Federal Communications Commission (FCC) on Wednesday, the nation’s second largest mobile carrier announced that it may choose not to participate in the upcoming incentive spectrum auction. AT&T reportedly made this threat as the FCC considers rules that would set aside spectrum for smaller carriers.

AT&T noted that it had never declined to participate in a spectrum auction in the past and had all intentions to participate this time around – but the carrier warned that if the FCC adopts rules that restrict how many licenses it can bid on it will have no choice but to not participate at all.

“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,” Joan Marsh, vice president of federal regulatory affairs for AT&T, said in a letter to the FCC as reported online by CNET on Thursday.

AT&T’s decision to pull out of the spectrum auction could also put the entire auction at risk as it could negatively affect the amount of revenue that FCC could raise. The FCC is looking to raise money to pay for a number of projects including a congressionally-mandated next-gen wireless network that is dedicated to first responders.

The Washington Post reported that the system alone is expected to cost some $7 billion.

If AT&T does pull out, it could mean that one of the nation’s key wireless operators would be opting to utilize the 600 MHz sliver of wireless spectrum set aside for 4G LTE service. That could mean that there would be less interoperability among LTE devices in the consumer market.

There is also the possibility that if AT&T does sit out the auction that number one mobile carrier Verizon, which also currently opposes the caps, could also sit out the auction. While Verizon has not commented on the matter, the Washington Post noted it is in a good position following AT&T’s opening moves.

“Verizon has the luxury of being the second mover: It can afford to wait and see how AT&T's message is received. In some ways, the threat of a threat from Verizon may be even more fearsome to the FCC than actually making one, analysts said,” the Post reported.

“They have to think long and hard whether it's in their corporate interest,” Jeff Silva, a former telecom policy analyst at Medley Global Advisors, told the Washington Post. “This is the last big auction for a long, long time. There's nothing on the drawing board that's anywhere comparable to what they're going to be doing in the incentive auction.”

The FCC had implemented rules that would set aside as much as 30 MHz of wireless spectrum in the upcoming auction, but only once an undetermined threshold that shows the bidding is competitive has been hit – and under this rule companies would be prohibited to hold at least one-third of the low-band spectrum in a given market to bid on additional spectrum in the 600 MHz auction.

That is where AT&T claims that such a rule would unfairly hurt its chances of actually obtaining the spectrum it needs to do anything meaningful.

“AT&T estimates that if such restrictions are adopted, it will be restricted in markets covering over 70 percent of U.S. POPs,” Marsh said in the FCC filing. She also added that both AT&T and Verizon “would be limited by the auction restrictions to a fragmented, uneconomic and inefficient 600 MHz footprint.”

While at this time it could be mere saber rattling, it isn’t clear if AT&T’s threats are serious or empty say analysts. AT&T would have to consider the costs of actually boycotting the auction.

“For AT&T to say that, ‘We’re not going to participate in the 600 MHz auction,’ ignores their capacity issues today,” New Street Research analyst Spencer Kurn told FierceWireless.