LAS VEGAS – Regional wireless operators have a number of specific issues challenging their ability to remain competitive in the mobile space, though it’s the possible size of spectrum licenses set to be auctioned off by the Federal Communications Commission that seems to be causing the most consternation.
Speaking during a carrier roundtable at this week’s Competitive Carriers Association event in Las Vegas, CEOs from a number of tier-two and tier-three operators expressed concern over the FCC’s decision making process in regards to what form licenses for the highly anticipated 600 MHz incentive auction will take.
Cellcom CEO Pat Riordan noted that smaller carriers will be severely challenged to compete in upcoming spectrum auctions if the FCC goes with license sizes under the “economic area” model. That model splits the country up into 176 slices, with most of those slices including at least one mid- to large-sized market. Instead, smaller carriers are looking for the FCC to slice license sizes up into “commercial market area” sized bits that would see the number of licenses available swell to 734 in total.
Riordan explained that if the FCC goes with EA-sized licenses, it would be forced to bid on a license encompassing Green Bay, Wisc., which is a market that will garner intense interest from larger rivals and may not be a market it’s interested in entering with that spectrum.
A similar argument was put forth by Ron Smith, CEO of Kentucky-based Bluegrass Cellular, who noted EA-based license sizes would force the carrier to acquire spectrum in larger markets outside of its current rural footprint.
“The license sizes have to be at a level where I can at least participate,” Smith said. “I serve between large markets. If we go with EAs, I just can’t afford to buy or enter large markets. … We all want to participate and are just asking for auction rules that will allow that.”
Looking to back the claim that smaller license sizes will not diminish potential auction revenues, Smith noted that during the 700 MHz auction, CMA’s represented just 33% of the spectrum put up for bid, but accounted for 48% of the auction revenues.
Riordan stepped in and noted that he was not buying claims by larger rivals that the number of licenses put forth by CMA rules would be too complicated, explaining that if a small carrier could handle the process, he was pretty sure larger carriers would be able to manage.
“This is not too complicated for Verizon or the FCC,” Riordan said.
The concerns were echoed throughout the CCA conference by smaller operators, though some of the association’s larger members – specifically Sprint and T-Mobile US – were pushing ever so slightly for the EA model. Kathleen Ham, VP of federal regulatory affairs at T-Mobile US, noted on an earlier panel that the already complex process in which the incentive auction is expected to use would only be exacerbated by the large number of licenses needed for the CMA model.
There did seem to be some suggestions that the FCC could go with a sort of hybrid scheme that would split the difference between EAs and CMAs, though there is no word on if that proposal could be ready in time for the planned 2014 auction.
Device complexity
Cellcom’s Riordan also expressed some distress over Apple’s latest dual-model iPhone launch, noting that the move will now require carriers to have 21 device models on hand, something that is different from Apple’s legacy of simplicity. Riordan explained that between the various memory-based models of the 5S; various memory and color combinations of the 5C; and the still offered 4S, smaller carriers will see their inventory management challenged.
“They have created too many phones that need to be carried now,” Riordan said. “That is 21 models to carry and a lot of phones to keep in inventory.”
Cellcom began offering Apple products in early 2012 along with a number of other regional operators.
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