Because a national mobile service provider’s holding of low-frequency spectrum may determine its ability to compete in offering a broad service area, including its ability to provide coverage efficiently in rural areas, the U.S. Dept. of Justice now argues that U.S. spectrum policy should allow firms such as Sprint and T-Mobile USA to acquire this spectrum.
That obviously would require bidding rules that give such firms preference, compared to AT&T and Verizon Wireless.
That emphasis on lower frequency band spectrum adds a new “quality of spectrum” dimension to policy making in the mobile spectrum area.
The Department of Justice's principal concern is that acquisitions of spectrum, whether at auction or through subsequent transactions, should not be used to create or enhance market power.
The objective, when it comes to spectrum allocation, is to provide the ultimate benefit to consumers, DoJ argues, and rightly so.
At the same time, DoJ is concerned that dominant service providers could acquire spectrum for the purpose of denying its use of other potential competitors, or for the purpose of raising competitor costs. “Spectrum warehousing,” where a carrier acquires spectrum only to keep it out of use, is one such potential example of behavior DoJ seeks to prevent.
“Absent compelling evidence that the largest incumbent carriers are already using their existing spectrum licenses efficiently and their networks are still capacity constrained, the Department would normally expect the highest use value for new spectrum that is in the public interest to come from rivals to the leading firms that could effectively make use of additional spectrum to expand capacity, improve coverage, or introduce new services in an effort to challenge the dominant firms,” DoJ argues.
Today, the two leading carriers have the vast majority of low-frequency spectrum,
whereas the two other nationwide carriers have virtually none. “This results in the two smaller nationwide carriers having a somewhat diminished ability to compete, particularly in rural areas,” the Department said.
And that’s the tricky part, some might argue. “Somewhat” diminished ability to compete in rural areas” is the crux of the matter. It is not that pro-competitive policies are unimportant. It might more be a case of how much of a remedy is required to overcome a “somewhat” diminished ability to compete.
Also, there’s a countervailing argument that larger contiguous blocks of spectrum are more efficient, which might suggest allowing the present owners to acquire more contiguous spectrum.
“The Department also recognizes that there may be substantial efficiencies associated
with ownership of relatively large blocks of spectrum,” DoJ also noted. “Specifically, due to the nature of wireless technology, for example, twice the spectrum may under certain conditions provide over twice the amount of capacity.”
Still, it is a complicated matter. Beyond a certain point, deploying more spectrum may require sizeable investments in equipment at each site, so the returns to large spectrum block ownership are limited – at some point.
Also, the Department expects that carrier aggregation technology currently under development will permit wireless carriers to realize some of the efficiencies described above even with small, non-contiguous blocks of spectrum in different bands, perhaps rendering somewhat moot the notion that ownership of larger blocks of contiguous spectrum leads to greater efficiency.
The point is that there are several mutually exclusive consumer benefit issues here, not the least of which is whether the highest value comes from spectrum efficiency or competition.
A balance therefore has to be struck between encouraging efficiency and avoiding anti-competitive behavior.
As always, policies favoring new competitors can have important market structure implications, at least initially. Whether those policies make much difference, long term, is more questionable.
Edited by
Braden Becker 
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