Lawmakers hear mixed message on limiting spectrum bidding

The U.S. Federal Communications Commission should limit the amount of spectrum that giant mobile carriers AT&T and Verizon Communications are able to buy in an auction scheduled for mid-2015, some U.S. senators said Tuesday.

But lawmakers could reach no consensus on proposals to limit the bids of the two largest mobile carriers in the U.S. in the upcoming auction of spectrum now controlled by television stations. Some Republican senators, along with an AT&T representative and other witnesses, including an AT&T official, called for unrestricted bidding in the mid-2015 auction of 600MHz spectrum.

"The FCC should let all interested participants freely compete against one other in the open market," Senator John Thune, a South Dakota Republican, said during a Senate Commerce, Science and Transportation Committee hearing. "It should avoid putting its thumb on the scales. The value of using spectrum auctions is that the free market is more effective at allocating spectrum than relying on the subjective opinions and predictions of government officials."

Thune and Joan Marsh, AT&T's vice president of federal regulatory affairs, urged the FCC to reject calls by carriers Sprint and T-Mobile USA, along with the U.S. Department of Justice and some other advocates, to cap the amount of spectrum the two largest carriers can buy. In the so-called incentive auction, TV stations would volunteer to give up prime spectrum for mobile broadband services in exchange for a cut of the auction proceeds.

T-Mobile and Sprint, through recent mergers, have become stronger competitors and don't need the FCC's help, Marsh told senators.

"An open auction is the fairest method to assign licenses because it ensures that all applicants have the same opportunity to obtain spectrum," Marsh said. "An open auction would allow market competition, rather than regulation, to allocate spectrum, ensuring that it is put to its best and highest use."

Still, if the FCC decides to cap spectrum purchases, it should do so for all carriers and not just the two largest, Marsh said.

Some other witnesses agreed with that approach. The FCC should adopt a "no-piggie rule" that limits any one carrier from buying too much of the available spectrum, said Harold Feld, senior vice president of Public Knowledge and a frequent AT&T critic.

But without some caps on the largest carriers, small regional mobile carriers won't be able to compete in the auction, said Steven Berry, president and CEO of the Competitive Carriers Association. Losing out on this 4G spectrum would be "disastrous" for many small carriers, he said.

Verizon and AT&T together control about 80 percent of the low band spectrum best suited for mobile broadband, Berry said. "One or two carriers should not be allowed to walk away with the entire pie," he said.

Democratic Senators Ed Markey of Massachusetts and Richard Blumenthal of Connecticut both called on the FCC to impose limits on the amount of spectrum the largest carriers can buy. While some senators and witnesses called on the agency to design an auction that results in the highest bids, there should be other priorities, including consumer benefits, Markey said.

In the early 1990s, Congress and the FCC designed auctions that brought new competitors to the market, leading to much lower mobile prices and innovation in devices, Markey said.

In those early mobile spectrum auctions, "what we said at that time was, we want to maximize the revenues ... but we didn't want to do it at the expense of innovation and consumer protection," Markey said. "It's not just deficit reduction. It's also, what are the benefits for consumers."

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's email address is grant_gross@idg.com.