Incentive Auction Reserve Has the Potential to Produce a “Wide Spectrum” of Benefits
By: Steven K. Berry, President & CEO, CCA
AT&T’s chokehold on low-band spectrum resources prevents competitors from offering service in urban and rural areas alike. Low-band spectrum travels farther and is less costly to deploy and operate, which is necessary to deploy cost-efficient mobile broadband in high-cost, low-density rural areas. Low-band spectrum also penetrates obstacles better than higher-band spectrum, which allows service to reach inside buildings where 80% of all wireless data consumption occurs. In the words of AT&T’s CEO Randall Stephenson, low-band spectrum “propagates like a bandit.” Together with Verizon, AT&T controls 73% of all low-band spectrum on a nationwide average basis and an even larger share in urban areas – a number that cannot and should not be ignored.
Despite these facts, in a (repetitive) blog AT&T says the way to improve consumer choice is by eliminating the market-based, pro-competitive spectrum reserve. Because the reserve is one of the most important consumer safeguards left against a single company acquiring all of the available resources needed to provide cost-effective wireless broadband service, AT&T is simply wrong.
Most of Competitive Carriers Association’s (CCA) members are smaller wireless operators that serve rural markets. As a group of our members explained in a recent letter to Chairman Wheeler, non-nationwide carriers strongly support the market-based spectrum reserve precisely because AT&T or Verizon are eligible to purchase reserve blocks of spectrum in the auction in most of the country. The map provided here shows that AT&T and/or Verizon can bid on reserve spectrum in markets covering almost three-quarters of the United States.
AT&T attempts to turn this generally-applicable low-band spectrum reserve rule on its head, arguing that because it has only focused on deploying service in densely populated, high-revenue generating areas, and is therefore reserve eligible in certain rural markets, the spectrum reserve is no good. This argument fails for several reasons. First and foremost, AT&T conveniently forgets to mention that its duopoly partner, Verizon, is reserve eligible in many markets as well, making foreclosure a certainty without a larger reserve.
But more egregious is AT&T’s singular focus on T-Mobile, which ignores the more than 100 competitive wireless providers that operate today throughout the United States. In addition to current providers, there are potential new entrants interested in the adoption of pro-competitive rules for the incentive auction, such as cable provider Charter Communications. The fact is CCA expects robust participation in the forward auction, and if AT&T is permitted to bid on reserve spectrum in large parts of rural America, this makes increasing the size of the reserve all the more important.
Additionally, AT&T claims bidding eligibility throughout all or most of many states. While that’s generally true as indicated in the above map, AT&T in its blog conveniently ignores areas where they are ineligible due to significant low-band spectrum holdings.
AT&T also has touted the benefits of partnership opportunities with Verizon. But they conveniently forgot to mention CCA’s nationwide members’ partnering programs. Sprint and T-Mobile are partnering with smaller carriers in more equitable ways, providing greater access to spectrum, devices, and roaming that will allow competitive carriers to control their own destiny. But for these new and improved partnerships to continue, all competitive carriers need to be able to access critical low-band spectrum.
Our members are willing and able to compete head-to-head with AT&T and Verizon in the market; in fact, most do today. Any statements that suggest competitive carriers want to prevent AT&T and Verizon from acquiring additional spectrum are simply untrue. CCA members want AT&T and Verizon in the same competitive ecosystem that supports all wireless carriers. But our members are rightly concerned about the Big Two’s ability to foreclose competition by acquiring all or most of the available low-band spectrum or to prevent competitive carriers from acquiring anything other than the most impaired license blocks during the auction’s assignment round.
If the spectrum reserve is not large enough to allow for more than one carrier to acquire enough spectrum to compete, AT&T or Verizon have the resources to acquire reserve spectrum in rural markets to prevent would-be rivals from competing. This is a serious concern. Expanding the reserve from three to at least four blocks of spectrum while capping reserve purchases at two blocks per carrier does not harm AT&T, which concedes it can purchase reserve spectrum in the vast majority of the country. Bottom line: an expanded reserve will provide enough headroom for competitive carriers to acquire the “table stakes” two-blocks of spectrum necessary to provide broadband service for consumers.
AT&T has a track-record of using its dominant position in the market to limit the utility of spectrum acquired by competitive carriers. In Auction 73, AT&T drove smaller carriers out of the smaller license-sized 700 MHz B Block into the more impaired larger license-sized A Block, and then carved up the band with false claims about risks of interference. As a result, handsets largely did not support 700 MHz A Block spectrum, which limited the utility and value of those licenses, and is still impeding robust LTE deployments in rural areas.
AT&T’s statements are particularly ironic in light of its history of broken promises to provide service in rural America. As a condition to the AT&T/BellSouth merger, for example, AT&T committed to provide broadband service to 100 percent of the residences living in the new company’s combined territory, most of which was rural. But AT&T now admits that it never lived up to its assurances of rural deployment. As another example, during AT&T’s failed attempt to buy T-Mobile USA, AT&T claimed the merger would benefit rural America when, actually, the proposed merger would have added less than 1% of new rural coverage area post-merger.
Rural consumers deserve better than AT&T’s unreliable statements and rock-bottom customer service. A spectrum reserve of at least four blocks of spectrum – combined with a two-block limit on how much reserve spectrum any one carrier can purchase – will help offer rural Americans the same competitive choices and values that urban consumers enjoy. Dozens of competitive carriers stand ready to offer alternatives to AT&T. But first these providers must fight AT&T’s misinformation campaign to gain access the low-band spectrum resources they need to compete. The Commission can improve consumer choice, encourage investment and accelerate wireless innovation in rural and urban areas alike by adopting a robust spectrum reserve of at least four blocks of spectrum, so that all carriers – even AT&T – can access this valuable, limited resource.
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