AT&T Is Playing Chicken With the FCC

Who will blink first in the battle over access to airwaves?

A cell phone tower rises above the trees in Sudbury, Massachusetts.
National Journal
Brendan Sasso
April 23, 2014, 11:21 a.m.

AT&T and the Fed­er­al Com­mu­nic­a­tions Com­mis­sion are in a high-stakes stan­doff.

The cell-phone car­ri­er is furi­ous over the FCC’s planned rules for an up­com­ing auc­tion of air­wave li­censes and is threat­en­ing to sit out of the auc­tion en­tirely.

An AT&T boy­cott could be dev­ast­at­ing for the FCC. The fed­er­al gov­ern­ment is de­pend­ing on the auc­tion to gen­er­ate bil­lions of dol­lars in rev­en­ue to build a na­tion­wide high-speed com­mu­nic­a­tions net­work for first re­spon­ders and to pay off a 2012 tax cut.

But speak­ing to re­port­ers on Wed­nes­day, FCC Chair­man Tom Wheel­er ac­cused AT&T of bluff­ing. Wheel­er said it’s “hard to con­ceive” of the na­tion’s second largest wire­less car­ri­er not par­ti­cip­at­ing in the auc­tion.

The FCC chief noted that AT&T and oth­er car­ri­ers have been ag­gress­ively lob­by­ing for years to get the FCC to give them ac­cess to more spec­trum — the fre­quen­cies that carry all wire­less sig­nals.

“Wire­less car­ri­ers, in­clud­ing AT&T, have been very force­ful and per­suas­ive in mak­ing the case that the suc­cess of their abil­ity to serve con­sumers — and there­fore the suc­cess of their busi­ness — de­pends on ad­di­tion­al spec­trum,” Wheel­er said. “I have a hard time en­vi­sion­ing this once in a life­time op­por­tun­ity for this kind of beach­front spec­trum be­ing something that people throw up their hands and walk away from.”

Un­der a plan ap­proved by Con­gress in 2012, the FCC will pay TV sta­tions around the coun­try to give up their broad­cast li­censes. The agency will then auc­tion those li­censes to wire­less car­ri­ers to give them ac­cess to more air­waves to carry their cus­tom­ers’ traffic.

Wire­less net­works have be­come clogged in re­cent years as con­sumers in­creas­ingly stream videos and browse the Web on their smart­phones.

But Wheel­er plans to cap the amount of spec­trum that AT&T and Ve­r­i­zon — the in­dustry’s two largest com­pan­ies — can buy in the auc­tion.

The FCC chief has warned that without caps, AT&T and Ve­r­i­zon could buy up all of the low-fre­quency spec­trum, which is es­pe­cially valu­able be­cause it can carry sig­nals over longer dis­tances.

If Sprint and T-Mo­bile — the smal­ler of the four na­tion­al car­ri­ers — are boxed out of the auc­tion, it could starve them of the spec­trum they need to com­pete, Wheel­er has claimed. Con­sumers would start flee­ing the two smal­ler car­ri­ers if their net­works be­come con­ges­ted with traffic.

The death of Sprint and T-Mo­bile would al­low Ve­r­i­zon and AT&T to ramp up prices.

In a fil­ing to the FCC earli­er this month, AT&T claimed the pro­posed lim­its would put the com­pany in an “un­ten­able and un­ac­cept­able po­s­i­tion.”

The com­pany ar­gued that it’s only worth bid­ding in the auc­tion if it can gain ac­cess to large enough blocks of spec­trum to sup­port cell-phone ser­vice.

“AT&T has nev­er de­clined to par­ti­cip­ate in a ma­jor spec­trum auc­tion and cer­tainly did not in­tend to do so here,” Joan Marsh, an AT&T vice pres­id­ent, wrote.

“But if the re­stric­tions as pro­posed are ad­op­ted, AT&T will need to ser­i­ously con­sider wheth­er its cap­it­al and re­sources are dir­ec­ted to­ward oth­er spec­trum op­por­tun­it­ies that will bet­ter en­able AT&T to con­tin­ue to sup­port high qual­ity LTE net­work de­ploy­ments to serve its cus­tom­ers.”

On an earn­ings call on Tues­day, John Steph­ens, AT&T’s chief fin­an­cial of­ficer, ap­peared to slightly walk back the com­pany’s threat. He said the com­pany is still work­ing with the FCC to “es­tab­lish auc­tion rules that will cer­tainly pro­mote a good res­ult for AT&T but will also pro­mote a suc­cess­ful res­ult for the auc­tion.”

“So we are in­ter­ested in par­ti­cip­at­ing,” Steph­ens said.

The FCC is ex­pec­ted to vote on the re­stric­tions on May 14. The auc­tion is sched­uled for next year.

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