June 24, 2013, 3:08 PM — The U.S. Federal Communications Commission should limit the two largest U.S. mobile carriers from buying too much spectrum in an upcoming auction, but the agency should also set a minimum price for the spectrum as a way to ensure that it receives the revenues projected, carrier T-Mobile USA proposed Monday.
T-Mobile and some digital rights groups have called on the FCC to limit the participation of AT&T and Verizon Wireless in auctions of valuable television spectrum anticipated in 2014.
But AT&T and other critics have said that limiting AT&T and Verizon could drive down the amount of money generated by the auction. U.S. lawmakers are counting on billions of dollars in auction proceeds to help fund a nationwide public safety network and to pay back TV stations for spectrum they give up.
T-Mobile has disputed those predictions, but its new proposal, called the dynamic market rule, is an attempt to counter the criticism of those opposing limits. Under the proposal, the FCC would cap spectrum holdings by any one carrier to about one-third of the available spectrum below 1 gigahertz. That band of spectrum is considered the best for delivering mobile broadband services over long distances.
The FCC would then set an auction minimum price, and if the minimum price is met, the agency will sell the spectrum with the available bids, T-Mobile said. If the minimum price isn't met during a first round of bidding, the spectrum restrictions would be gradually relaxed until the minimum price is met.
An AT&T spokesman said the company is studying the T-Mobile proposal but declined to comment further.
T-Mobile is concerned that AT&T and Verizon will use their resources to scare other bidders away from the auction, said Tony Russo, T-Mobile's vice president for federal government relations.
"The two dominant carriers have an incentive to box out other carriers from this low-frequency spectrum," he said. "If others do not participate in the auction, this auction may fail or the two dominant carriers may walk away with the bulk of the available low-frequency licenses at below market price with no real prospect for vigorous competition."
A cap on participation by AT&T and Verizon shouldn't hurt auction proceeds, said Gregory Rosston, deputy director of the Stanford Institute for Economic Policy Research and a former FCC deputy chief economist. "Other bidders will have more of an incentive to show up at the auction and bid aggressively," said Rosston, who is advising T-Mobile on the upcoming auction.
The T-Mobile proposal will allow the FCC to put spectrum restrictions to a "market test," Rosston added. "If T-Mobile is right, the auction would stop with full limits in place and sufficient revenue."