In 2015, the Federal Communications Commission (FCC) is set to auction off airwaves worth billions to wireless companies. Next year’s highly anticipated auction will involve buying airwaves back from broadcasters and then selling new licenses for those airwaves to spectrum hungry wireless companies who are looking to expand their networks.
The agency has pledged to set aside some unlicensed airwaves that usually fuel consumer electronic devices like garage door openers and Wi-Fi routers. Some groups however, fear that the FCC may not reserve enough of these valuable airwaves as it tries to meet congressionally set revenue goals.
A spectrum auction is a process whereby a government uses an auction system to sell the licensing rights to transmit signals over specific bands of the electromagnetic spectrum and to assign scarce spectrum resources. Normally, depending on the specific auction format used, a spectrum auction can last from a single day to several months from the opening bid to the final winning bid. When you have a well-designed auction, resources are allocated efficiently to the parties that value them the most.
This is where AT&T takes exception. According to the new rules that the FCC has put in place for next year’s auction, companies would be prohibited from bidding on additional spectrum in the 600 MHz if they already have at least one-third of the low band spectrum sitting below 1 GHz.
While AT&T feels that this ruling would cut into the amount of spectrum that the larger companies like AT&T and Verizon can purchase, the FCC’s goal seems to be geared towards allowing the smaller carriers such as Sprint and T-Mobile the opportunity to also bid, even if they do not have the same financial resources. This has led to AT&T threatening to not participate in next year’s spectrum auction.
According to Joan Marsh, who is vice president of federal regulatory affairs for AT&T, "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."
The FCC has not made any comments in direct response to Marsh’s comments however, FCC chairman, Tom Wheeler, did make the following remarks, "All who want to participate in the auction will be able to bid. In order to assure coverage and competition in rural America, it may be necessary to assure no one can monopolize the bidding."
The feeling is that if AT&T does not participate it could put the entire auction in jeopardy. It actually seems to propose a series of problems. Obviously the one that the FCC is most concerned with is the fact that without AT&T’s participation there would be a question as to how much revenue the FCC could raise from the auction.
On the flip side of that you have the potential for a lack of interoperability between LTE devices for the wireless consumer. This would come about if AT&T does not bid on the 600 MHz spectrum. This small slice of wireless spectrum is used to deploy 4G LTE services, if AT&T does not participate and no one else can afford to purchase it, there would be a gap in continuity.
You would think that if this was truly a problem Verizon would also feel the same way and file a complaint with the FCC. To date, no such complaint has been filed. That makes it difficult to figure out if AT&T is bluffing and simply looking to get more favorable rules from the FCC or if it will actually follow through.
A factor that may have some bearing on this whole issue is that the FCC is attempting to get TV broadcasters to give up a total of at least 80 MHz of wireless spectrum for the auction. This is something that many experts feel is doable. If that is the case, then that would leave about 40 MHz of spectrum that would be available for unrestricted bidding by AT&T and Verizon. As a general rule, roughly 10MHz of spectrum is reserved as guard bands to prevent interference with TV broadcasters who remain on the air.
During a panel discussion at the Competitive Carrier Association, which took place last month in San Antonio, Kathleen Ham, who is vice president of federal regulatory policy at T-Mobile, said "You have AT&T and Verizon taking 82 percent of the profits in wireless and about 68 percent of the subscribers. We are nipping at their heels, but they have deep pockets. It's critical to get this auction right. As the Department of Justice argued last year, we can't compete without spectrum. And AT&T and Verizon have the size and power to dominate this auction. So this isn't just about putting out spectrum and allowing the highest bidder to take it. You also have to care about competition."
The fact that this is likely to be the last time low-band spectrum will be made available for a long time, makes this auction particularly important to the wireless industry. Operators such as T-Mobile and Sprint, as well as smaller rural operators are in desperate need of this low-band spectrum. Due to the fact that higher frequency spectrum, which travels over shorter distances would be more expensive in terms of deployment, the low-band spectrum becomes quite important.
The deployment of LTE networks has finally started to have a steady push forward. It would be a shame if AT&T did not participate in the auction causing the interoperability problems that can arise from such an action. I see the potential for so many problems that can be seen by so many different sides of the wireless industry.
Edited by
Maurice Nagle