By Thomas Gryta
The Justice Department on Thursday warned the coming airwaves
auction runs the risk of concentrating more wireless spectrum in
the hands of AT&T Inc. and Verizon Communications Inc., the
nation's two largest U.S. wireless carriers.
In a letter sent Wednesday, the Justice Department urged the
Federal Communications Commission to consider helping smaller
nationwide carriers gain access to valuable spectrum at a major
airwaves auction next year.
One way to do that would be to increase the amount of airwaves
set aside for smaller companies in the auction slated for early
2016, a position that has been pushed by smaller operators such as
T-Mobile US Inc.
William Baer, assistant attorney general for the antitrust
division, in the letter called on the FCC to consider "the
well-established competition principle that those with market power
may be willing to pay the most to reinforce a leading
position."
A senior FCC official said Thursday that it wouldn't propose
increasing the amount of spectrum earmarked for small operators,
keeping with its suggested 30 megahertz reserve.
The auction will open up airwaves currently used by television
broadcasters for wireless use. The frequencies, often referred to
as low band, are considered to be very valuable because they are
good at carrying signals over long distances and deep into
buildings. The majority of low-band spectrum is currently held by
AT&T and Verizon.
"The Commission should ensure that the allocation of spectrum
through the auction does not enable carriers with high market
shares to foreclose smaller carriers," Mr. Baer wrote in the
letter.
AT&T and Verizon have about 75% of the mainstream customers
that use the four major U.S. wireless carriers as of the end of
March, according to UBS.
The letter shows the Justice Department retains concerns about
the concentration of market power in the wireless industry. In
April 2013, Mr. Baer pushed publicly for the FCC to govern spectrum
holdings in a way that ensures smaller nationwide carriers can
compete.
In recent years, the Justice Department has helped stop
consolidation among the major carriers, including suing to block in
AT&T's attempted $39 billion acquisition of T-Mobile. Last
year, the Justice Department made it clear that it would likely
oppose an attempted merger of T-Mobile and Sprint Corp.
On Wednesday, a group of Democratic senators also wrote to the
FCC, saying it should "evaluate its auction rules to ensure they
prevent excessive concentration of spectrum among the nation's
largest wireless providers."
An AT&T spokesman declined to comment. The company has
argued recently that T-Mobile is advocating for the rules to avoid
competitive bidding in urban markets. AT&T has said its
spectrum holdings in rural areas are insufficient so it would able
to bid on all the spectrum on offer.
Verizon, meanwhile, said T-Mobile doesn't need any set asides in
the auction. "T-Mobile is a well-funded entity that, along with its
partner company, Deutsche Telekom, is more than financially capable
of competing in a fully open auction," a Verizon spokesman
said.
The FCC's proposed rules on how much spectrum be reserved for
smaller operators will circulate among the commissioners for vote
in July, though there is still an opportunity for revisions.
T-Mobile is holding out hope that the FCC's position will
change. Andy Levin, T-Mobile's head of government affairs, said the
Justice Department letter suggests there is still room to influence
the process.
"There would be no point in writing the letter if they didn't
want the FCC to take another look," Mr. Levin said.
Write to Thomas Gryta at thomas.gryta@wsj.com
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