AT&T, T-Mobile US argue auction activity backs their respective claims
Auction 97 repercussions continue to reverberate across the mobile telecom space as AT&T and T-Mobile US traded barbs in dueling “policy blogs” in attempts to dissect what happened and set up arguments ahead of the planned 600 MHz incentive auction scheduled for next year.
The latest round of arguments began on the heels of Auction 97’s close when T-Mobile US CEO John Legere put out a statement claiming the proceedings were a “disaster for American wireless consumers.” Legere argued that the auction showed that the nation’s two largest mobile operators used their deep pockets to gobble up most of the licenses up for bid in the record-setting auction, with three auction participants grabbing 94% of the spectrum sold. That third participant was Dish Network, which acquired $13 billion worth of licenses through a pair of designated entities that resulted in an actual bill of less than $10 billion.
Legere used this angle to argue for more stringent rules heading into the 600 MHz incentive auction process that would set aside more spectrum for participants outside of AT&T and Verizon Communications.
AT&T last week came out with its own version of events, noting that T-Mobile US’ auction results were due to it not wanting to bid what the licenses are obviously worth. In addition, AT&T said that in dissecting the auction activity, Dish Network’s DE partners were the ones that appeared to have usurped T-Mobile US’ bidding efforts.
Joan Marsh, VP of federal regulatory at AT&T, noted that in some of the auction’s early rounds, T-Mobile US had as much as $3.5 billion in total potential winning bids before ending up with 151 licenses totaling $1.77 billion.
“From a strategic perspective, one can surmise that T-Mobile came to the auction with a $3.5B budget but, as valuations rose, decided to take some of its capital off the table, which was certainly its prerogative to do,” Marsh said. “But you can’t withdraw capital from the auction then complain that you didn’t win. … Spectrum auctions are capital-intensive. Period. You can’t win if you don’t bring capital and stand prepared to use it.”
Marsh also noted that T-Mobile US’ bidding activity was initially centered on the G-Block licenses up for bid, with a majority of those licenses ending up in the hands of Dish Network’s DE partners SNR Wireless LicenseCo and Northstar Wireless. AT&T said Dish outbid T-Mobile US on 132 licenses, with AT&T outbidding its smaller rival on 26 licenses and Verizon outbidding T-Mobile US on 16 licenses. On the licenses that T-Mobile US did win, AT&T said T-Mobile US had to outbid Dish on 69 of those licenses, compared with 12 against AT&T and 32 against Verizon.
“In the end, Dish – a company with less revenue than T-Mobile and no wireless subs – showed up with a $10 billion budget (which it turned into $13 billion in spending power with the taxpayer’s help) and simply ran T-Mobile out of much of what it wanted,” Marsh added. “And you can’t blame that on us.”
Marsh ended her blog post by arguing the Federal Communications Commission should re-evaluate its DE program as opposed to moving forward with setting aside more spectrum in the 600 MHz auction.
“It is an undeniable fact that in Auction 97 AT&T and Verizon’s deep pockets enabled them to win 63% of all paired AWS-3 spectrum, or roughly 91% of the value of all the spectrum won by wireless carriers in that auction,” T-Mobile US countered. “They have the incentive and the ability to foreclose smaller carriers from spectrum auctions, and the last auction results clearly demonstrate that. Considering Verizon and AT&T also currently control 73% of the nation’s low-band spectrum, a similar outcome at next year’s incentive auction would be a disaster for competition and innovation in mobile broadband.”
The FCC has already said it is looking to set aside up to 30 megahertz of spectrum in each market for those participants holding less than one-third of spectrum in those markets below the 1 GHz level, an amount that T-Mobile US argues should be increased. The FCC also rolled out a notice of proposed rulemaking looking at changing DE rules. Those changes including the possible removal of barriers preventing DEs from leasing spectrum to other non-DE operators, and adjusting the financial threshold on DEs receiving bidding credits.
AT&T countered T-Mobile US’ position by arguing that Auction 97 activity showed T-Mobile US should be more concerned about bidders like Dish Network, Sprint and Google, which with current rules would all be allowed to bid on the reserved spectrum. Of course, if more spectrum is set aside for these entities the potential for all to garner a piece of those licenses could increase.
AT&T and Verizon came out after the auction questioning Dish Network’s bidding activity. Legere did as well in his post-auction rant, though did not mention Dish Network by name.
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