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Verizon: FCC Favoring Sprint, T-Mobile Would Be Unjust

Verizon warned the FCC that it would be "perverse and unjust" to adopt rules for the forward portion of the broadcast incentive auction that would favor T-Mobile and Sprint, calling them large multinational companies with plenty of money and spectrum and saying spectrum set-asides could limit competition, resulting in consumer harm.

The auction is in two parts, the reverse auction where broadcasters offer up spectrum, then its sale in the forward auction to the highest wireless broadband (presumably) bidder.

FCC Chairman Tom Wheeler is proposing that the FCC withhold some of the spectrum, under certain circumstance, so that carriers without as much low-band spectrum in a market, which in many cases would be Sprint and T-Mobile, would have a chance to bid on it without having to bid against carriers who already have a lot of it, which in many markets would be AT&T and Verizon.

Verizon says Sprint and T-Mobile are perfectly capable of bidding for the spectrum in an open auction. "The last time T-Mobile chose to participate in an auction, it dominated the bidding – spending $4.2 billion and acquiring more spectrum than Verizon and AT&T combined. And Sprint’s new owners have ample resources with which to buy spectrum in the incentive auction if they choose to participate."

Concerned about the concentration of low-band spectrum--which includes the 600 MHz spectrum in the broadcast incentive auction-- in the hands of the major carriers—AT&T and Verizon—the FCC is proposing to set aside from the broadcast incentive forward auction up to 30 MHz of spectrum in each market as a reserve for companies with less than 1/3 of the low-band spectrum in those markets.

But also concerned with raising enough money in the auction to pay broadcasters and support emergency communications and other outlays, that spectrum will not be reserved until a specific trigger—to be determined—has been met. That means that all wireless carriers can bid for at least some spectrum in every market.

AT&T and Verizon have complained about that reserve, but the FCC argues its proposal is a modest one that balances the need for robust participation in the auction and for making sure that low band spectrum gets into the hands of more carriers. Asked whether this proposal was at all modified to try to keep AT&T in the auction, the proposal was about consumers and competition.

The FCC is also proposing to update its local market spectrum screen to reflect the importance of low-band spectrum, which many consider beachfront wireless broadband spectrum for its propagation characteristics, though AT&T has taken some issue with that.

The change, teed up along with the auction rules for a May 15 vote, make it clear that a transaction that results in a company getting more than 1/3 of low-band spectrum in a market would also deserve enhanced scrutiny on a case-by-case basis.

Verizon does not like that either. It argues that if the FCC does adjust the screen, it should include "all suitable" spectrum, including the entire 2.5 GHz band and the AWS-4 band spectrum Sprint has. All told, says Verizon, Sprint has twice as much spectrum as Verizon.