T-Mobile Wants a Consolation Prize for Its Dead Merger

The cell-phone carrier is lobbying the FCC for access to more airwaves.

A man talks on a mobile phone at the T-Mobile stand at the CeBIT technology fair March 15, 2007 in Hanover, Germany. CeBIT, the world's largest tech fair, will run from March 15-21. (Photo by Sean Gallup/Getty Images)
National Journal
Brendan Sasso
Aug. 14, 2014, 11:22 a.m.

T-Mo­bile is hop­ing the Obama ad­min­is­tra­tion will show some sym­pathy after for­cing the com­pany to call off mer­ger talks with Sprint.

The cell-phone pro­vider is ask­ing the Fed­er­al Com­mu­nic­a­tions Com­mis­sion to come up with new rules that will give it ac­cess to more air­waves, which will mean bet­ter cel­lu­lar ser­vice for its cus­tom­ers. T-Mo­bile’s im­pli­cit ar­gu­ment is that it de­serves an ad­di­tion­al leg up over its com­pet­it­ors after the gov­ern­ment killed its hopes of be­ing bought by Sprint.

Sprint and T-Mo­bile nev­er ac­tu­ally ap­plied to merge, but they aban­doned their talks last week due to ob­vi­ous res­ist­ance from the FCC and Justice De­part­ment.

This week, T-Mo­bile filed a pe­ti­tion ask­ing the FCC to re­work its rules for an up­com­ing auc­tion of spec­trum””the air­waves that carry all wire­less sig­nals. Sprint filed a sim­il­ar pe­ti­tion on re­lated is­sues.

The FCC already en­acted rules to fa­vor T-Mo­bile and Sprint in the auc­tion, which is planned for next year. The rules cap the amount of spec­trum that the two largest car­ri­ers””Ve­r­i­zon and AT&T””can buy in each mar­ket around the coun­try. The FCC’s goal is to en­sure that the two in­dustry gi­ants don’t dom­in­ate the auc­tion, ac­cu­mu­lat­ing enough spec­trum to kill off com­pet­i­tion and raise prices. Without ad­equate spec­trum, a car­ri­er’s net­work would be­come con­ges­ted and slow, lead­ing cus­tom­ers to flee to com­pet­it­ors.

In a blog post Wed­nes­day, T-Mo­bile’s head of reg­u­lat­ory af­fairs, Kath­leen Ham, said cap­ping the largest car­ri­ers was “one of the most in­nov­at­ive and for­ward-think­ing” ac­tions the FCC has ever taken. But T-Mo­bile thinks the FCC should go farther.

“We want the FCC to do more of the right thing,” she ex­plained.

T-Mo­bile’s form­al fil­ing with the FCC strongly al­ludes to the re­cent de­mise of its deal with Sprint. A main ar­gu­ment that FCC Chair­man Tom Wheel­er and lead­ers at the Justice De­part­ment made against the mer­ger was that it was im­port­ant to keep four in­de­pend­ent car­ri­ers to pre­serve in­dustry com­pet­i­tion.

In its fil­ing, T-Mo­bile said the FCC’s rules for the spec­trum auc­tion are at “odds with its stated goal of pro­mot­ing com­pet­i­tion among four na­tion­wide com­pet­it­ors.”

The cur­rent frame­work “gives too much to the two dom­in­ant car­ri­ers at the ex­pense of com­pet­i­tion,” T-Mo­bile claimed. The com­pany wants the FCC to des­ig­nate at least half of the spec­trum in each mar­ket as off-lim­its to the largest car­ri­ers.

T-Mo­bile, the smal­lest of the four car­ri­ers, has struggled to com­pete with Ve­r­i­zon and AT&T. Sprint and T-Mo­bile saw a mer­ger as the best way to gain the scale they need to be on equal foot­ing with the in­dustry lead­ers.

The FCC de­clined to com­ment on the pe­ti­tion.

Wheel­er had said he would be will­ing to re­con­sider the rules for the auc­tion if there was an im­port­ant change in the mar­ket­place (i.e. if Sprint and T-Mo­bile ac­tu­ally merged). But there haven’t been any ma­jor changes in the three months since the FCC en­acted the rules, so it ap­pears that T-Mo­bile’s bid is a long shot.

Wal­ter Piecyk, an ana­lyst for for re­search firm BTIG, said T-Mo­bile’s fil­ing is “clearly con­nec­ted” to the re­cent de­mise of its Sprint deal. It would be un­usu­al for the FCC to re­verse its de­cision, but Piecyk in­sisted there’s still time for the agency to tweak the rules be­fore the auc­tion next year.

T-Mo­bile has a “good ar­gu­ment” for why the FCC should re­con­sider “giv­en that the FCC has set up some road­b­locks for T-Mo­bile to gain scale with a mer­ger with Sprint,” he said.

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