Federal regulators plan to set aside a portion of choice
spectrum for smaller wireless carriers at an auction of TV airwaves
scheduled for next year.
At the spectrum auction, TV stations will take bids to give up
their valuable low-band spectrum so it can be resold to the
wireless carriers to meet the exploding demand for online
video.
According to people familiar with the matter, the Federal
Communications Commission plans to reserve a portion of that
spectrum to prevent the two largest wireless carriers from
purchasing it all.
Asked about the plan, the agency released a statement from
Chairman Tom Wheeler, who said: "All who want to participate in the
auction will be able to bid...In order to assure coverage and
competition in rural America, it may be necessary to assure no one
can monopolize the bidding, "
Lower-frequency spectrum--below 1 gigahertz--is generally
considered premium because it can cover greater distances and
travel through walls and other barriers. The two largest wireless
carriers, AT&T Inc. and Verizon Wireless, control the vast
majority of the low-band spectrum licensed for wireless use. Sprint
Corp. and T-Mobile US Inc. have argued they need access to more
low-band spectrum to compete on a national basis, and they see the
2015 auction as a unique opportunity to acquire it.
The FCC has been considering how to ensure that smaller wireless
companies have a chance to compete at the sale.
The plan they devised would set aside a slice of the
spectrum--up to 30 megahertz--but only after bidding in each market
reached a certain threshold. After the threshold was reached,
companies that held at least a third of the low-band spectrum in
that market wouldn't be allowed to bid. In most markets that would
exclude AT&T and Verizon from bidding on the restricted
spectrum, and in some cases it would affect smaller regional
carriers, such as U.S. Cellular Corp. and C Spire Wireless, that
hold low-band spectrum in specific markets.
The FCC's threshold for setting aside spectrum in a market
hasn't yet been determined, but it could include some combination
of the overall bids in the market, or the price per megahertz,
according to people familiar with the plan. If there wasn't
sufficient demand for the restricted spectrum in a market, it would
be returned back to the unrestricted pool so anyone could bid on
it.
The FCC's plan represents a victory for Sprint and T-Mobile,
which have lobbied fiercely for limits on how much low-band
spectrum AT&T and Verizon can buy at the auction. Both
companies and several public-interest groups have argued that
absent such limits, the two companies might attempt to purchase all
the spectrum licenses to stymie competitors.
Their argument received a boost one year ago, when the Justice
Department encouraged the FCC to ensure that smaller carriers had a
shot at winning spectrum at the auction. However, the FCC's rules
could draw fire in Congress, where House Republicans have been
adamant that the FCC shouldn't attempt to limit bidders at the
auction in any way.
In a separate proceeding, the FCC will consider changing how it
calculates a company's spectrum holdings in a local market, whether
it is high-band or low-band, for purposes of evaluating spectrum
deals.
When a company attempts to purchase spectrum licenses, the FCC
considers whether the purchaser holds more than a third of the
spectrum available for wireless use in the affected areas. If a
company exceeds the one-third cap, it triggers a deeper review, but
not an automatic rejection.
Under the proposed changes, the FCC would expand the amount of
spectrum considered suitable for wireless, meaning the amount
needed to reach the one-third cap would increase.
Among the companies affected would be Sprint and Dish Network
Corp., which both hold significant amounts of spectrum that wasn't
previously considered suitable for wireless, but will now be
counted against the cap.
Also as part of this action, the FCC would start evaluating
whether a company holds more than a third of the low-band spectrum
available in a market, with the cap triggering a deeper review.
Participants who exceeded the one-third cap on low-band spectrum by
winning licenses at the 2015 auction would be grandfathered in
under the new rules.
Write to Gautham Nagesh at gautham.nagesh@wsj.com
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