The U.S. Telecom industry is increasingly being divided into two power blocks. A better way to describe the situation would be to name them the haves and have not’s. On one hand we have smaller players like Sprint and T-Mobile trying to do all the catching up while on the other hand there are the two heavy weights Verizon and AT&T who already enjoy over 80% of the total spectrum below the 1 GHz band.
The Federal Communications Commission will conduct a fresh 600 MHz Spectrum auction which is expected to kick off in early 2015. Not surprisingly, all the attention is now on Verizon and AT&T's bid to get the Lion’s share and stamp its supremacy forever as opposed to Sprint and T-Mobile, trying to stop them from doing so.
Why This Auction Is So Critical
To start with, Spectrum on lower frequencies propagates better than spectrum on higher frequencies. Needless to say, compared to the 700 MHz spectrum that was auctioned in 2008, this one is off far more importance to carriers, as it could be a potential game changer. If smaller players like Sprint and T-Mobile have to match up their networks to the big two, it would have to make the most out of this auction. Conversely, AT&T and Verizon could shut out the perceived threat from all the noise created recently by its competitors by bagging a major chunk of this Spectrum auction.
Efforts to Stop the Juggernaut
The Competitive Carriers Association, Computer & Communications Industry Association, C Spire, Dish Network, Rural Wireless Association, Sprint, T-Mobile US and U.S. Cellular, have joined hands to ensure that AT&T and Verizon should not be allowed unconditional bidding access during the auction. According to them, the big two should not be allowed access to more than one-third of the 70 MHz of Spectrum that will be on offer.
Verizon Wireless and AT&T have countered this, stating that any limit on the amount of spectrum a company can bid for could suppress auction revenues.
Who’s Ahead in the Race?
AT&T and Verizon, in spite of all the efforts from others, seem to be ahead in the race. Together, they have spent around $30 million on lobbying for the major chunk while Sprint and T-Mobile could only manage $8 million for the cause. All that money is being spent by the Big Two to convince FCC to allow them to participate in an unfettered auction.
To give a fair idea about the effectiveness of their efforts, Jonathan Spalter CEO of Mobile Future, a Washington, D.C.-based non-profit advocacy group, “The best way to ensure a successful auction — one that would best serve customers and promote innovative technologies — is to allow all wireless companies to bid without restrictions on as many frequencies as they want.”
Just to put things in perspective, if you visit Mobile Future’s website, both AT&T and Verizon feature under their list of members, while Sprint and T-Mobile don’t.
To Sum It Up
FCC chairman Tom Wheeler, will be under a lot of pressure to make both the camps happy. We still remember that AT&T's bid to acquire T-Mobile was turned down by FCC citing concerns that the transaction would kill wireless competition. Going by the same rulebook, allowing Verizon and AT&T have their way, as they did in the 700MHz auction six years ago could mean an end to wireless competition anyway. In that case, even a merger of T-Mobile and Sprint would not be enough to sustain a healthy competition in the best interest of the customers.