"Spectrum is the 'life blood' of the wireless industry and in a world of scarce spectrum opportunities, it is vital the FCC, as the expert agency, have the ability to design auctions to ensure robust competition exists for consumers."
The above quote is not, as would seem most likely, from the Federal Communications Commission. It is from a statement released by T-Mobile in defense of the FCC from an attack by none other than T-Mobile's former betrothed, AT&T (NYSE: T ) .
AT&T, reeling from its failed attempt to acquire T-Mobile from its parent company Deutsche Telekom (NYSE: DT ) last year, is desperate for some of that "life blood." The carrier is worried that the FCC will manage the proposed auction of government-owned broadcast spectra in a manner that will prohibit it, the second-largest national wireless carrier -- along with Verizon (NYSE: VZ ) , the largest carrier -- from buying any of it.
The role of Congress
The bills that would authorize the auctioning of that spectrum are expected to be introduced in Congress next month. AT&T is afraid that the present wording of the proposed legislation would be modified to give the FCC total control over who would be eligible to bid and who would not.
"Our position is not that we are against the FCC overseeing spectrum auctions," an AT&T spokesman said, according to the New York Post. "We simply are asking why the FCC wants the Congress to strip language from a bill that says the FCC can't exclude qualified bidders."
Verizon echoed AT&T's sentiments, telling the NYP that it "has no issue with FCC oversight of auctions," but that it is only concerned with the auctions being " … open and not tied down by conditions that might limit players from bidding on [the] spectrum."
The stakes in this spectrum game are high. Estimates put the amount that could be raised by the auction as high as $25 billion. If you compare that to the $39 billion AT&T agreed to pay for T-Mobile and its spectrum cache before that deal was axed, then it would take a deep-pocketed bidder indeed to stop an unfettered AT&T from taking it all.
And that's why T-Mobile turned on its former erstwhile suitor by siding with the FCC. Now that it's back in the wireless game on its own -- though a distant fourth behind Sprint Nextel (NYSE: S ) -- T-Mobile wants a fair crack at the available spectrum too. Even with the $3 billion in cash it took out of AT&T's wallet as a penalty fee for the failure of their merger, T-Mobile knows it would be unlikely to come out ahead in a bidding war with the very spectrum-starved AT&T.
And if T-Mobile and Sprint would have a hard time outbidding the giants, what about the smaller second-tier wireless carriers, such as Leap Wireless (Nasdaq: LEAP ) , MetroPCS (NYSE: PCS ) , and United States Cellular?
All's fair in love and spectrum auctions
Last week, Tom Sugrue, T-Mobile's senior vice president for government affairs, told the NYP, "When it crafted the original auction statute 20 years ago, Congress wisely recognized the need to empower the FCC with authority to promote competition in its spectrum auctions, and that authority should not be undermined at a time when it's more important than ever."
On the other hand, the leader of AT&T's Federal Regulatory group, Bob Quinn, wrote in the AT&T Public Policy Blog that "[t]he proposed statutory language ensures any qualified entity's right to participate in the auction and prohibits the FCC from blocking an otherwise qualified bidder from participating in the auction -- i.e., creating rules designed to pick winners and losers in the auction itself."
And, Mr. Quinn added, "The FCC has done some creative tinkering with auctions in the past with dubious results … From AT&T's perspective, however, we fear that this time around, some of its tinkering may be aimed at specific auction participants, like us."
There're at it again
This is not the first time that has AT&T has butted heads with the FCC. In late November, just preceding AT&T's decision to forgo its proposed merger with T-Mobile, the FCC released a scathing staff report that essentially laid waste to each argument AT&T put forward in favor of the deal. It didn't take long for AT&T to lash back at the agency. In a statement it released the very next day, AT&T said the FCC's report was " … so obviously one-sided that any fair-minded person reading it is left with the clear impression that it is an advocacy piece …"
I'm sure we'll be hearing more on this spectrum auction topic in the coming weeks. FCC chairman Julius Genachowski told an audience at the Consumer Electronics Show last week that Congress will decide on the incentive auctions by March 1. That will give AT&T and the other likely participants plenty of time to flood Washington with lobbyists and to honor us with their viewpoints in full-page newspaper ads.
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