FCC Incentive Auction Can Accomplish Even More for Competition

August 11, 2014

T-Mobile has filed a petition for reconsideration of the FCC’s Mobile Spectrum Holdings Order. While the Commission’s approach to mobile spectrum holdings in the upcoming 600 MHz incentive auction represents one of the most innovative and forward-thinking set of regulations in its eighty-year history, we seek reconsideration because the Order stops short of adopting rules sufficient to prevent the two largest incumbent carriers from dominating the market. Our petition respectfully requests the Commission adjust its rules for the incentive auction by increasing the amount of low-band spectrum reserved for competitive carriers and modifying when auction revenues would trigger access to this reserve.

Spectrum, and especially low-band spectrum, is critical to competition in the mobile wireless market. In its Order, the Commission recognized that the 600 MHz incentive auction offers the one and only opportunity for competitive carriers such as T-Mobile to acquire significant blocks of low-band spectrum through competitive bidding. Without a reasonable limit on the two dominant carriers’ market power, the two dominant carriers would likely push competitors out of the auction and consumers would face an uncertain future of less innovative, more costly, and lower quality wireless broadband services.

In response and based on an extensive record, the Commission adopted an innovative, market-based spectrum reserve to ensure that bidders could acquire low-band spectrum without the risk that the two dominant incumbents would foreclose competitors from winning the resources they need to compete.

The Commission made the right decision in adopting a contingent set of reserve blocks for competitive carriers. Indeed, the brilliance of the Order is the use of a mechanism that allows the FCC to avoid having to choose between robust wireless broadband competition, on the one hand, and sufficient auction revenue, on the other.

Unfortunately, the Order establishes only three reserve blocks for competitive carriers and four unreserved blocks for the dominant carriers. This result is exactly backwards: competitive carriers that have little or no low-band spectrum need more access to these resources, while the dominant carriers that control nearly three-quarters of all low-band spectrum in the market need less. The division of blocks also permits the two dominant incumbents to avoid bidding against one another by splitting the blocks evenly between them at two each – a result that will damage competition and auction revenues.

In addition, the Order inexplicably ties the trigger for creating the reserve licenses to satisfaction of an arbitrary price per unit that does nothing to advance competition or any of the other goals of the Communications Act and instead risks undermining the very competition the Commission seeks to promote.

We commend the FCC for its novel effort in developing an innovative, pro-competitive approach to the incentive auction. Our concerns with the Mobile Spectrum Holdings Order are limited and narrowly tailored: we want the FCC to do more of the right thing by making the spectrum reserve and its trigger meaningful enough to make sure the intended result of a more competitive wireless broadband market is achieved.