• CBO Estimates As Much As $40 Billion For Wireless Auction, But Not If T-Mobile Has A Say

    The CBO just released it’s proceeds estimate on the next wireless spectrum auction — between $10 and $40 billion — and let’s not forget that T-Mobile is sure to cajole the government into swooping in and boxing out Verizon and AT&T in order guarantee it gets a piece of the pie.

    The Federal Communications Commission’s last spectrum auction, which ended in January, raised a record-breaking sum of nearly $45 billion. About $42 billion of that (94 percent) was spent by just three companies, prompting T-Mobile CEO Jon Legere to write a blog post in February arguing that the FCC should reserve more spectrum for smaller carriers in future auctions. (RELATED: Corruption at the FCC? TV Exec’s Donate to Dem Lawmaker, Get Million-Dollar Rule Exemption)

    “While the AWS-3 auction was a success for the US Treasury, it was a disaster for American wireless consumers,” Legere asserts, claiming that aggressive bidding by Verizon and AT&T, the two largest wireless carriers in the U.S., pushed prices beyond what most small carriers could afford, stifling competition and raising prices for customers.

    Indeed, AT&T led the field at that auction, spending just over $18 billion, while second-place Verizon spent nearly $10.5 billion, according to Fierce Wireless. T-Mobile, comparatively, spent just less than $2 billion.

    Legere points out in his blog post that AT&T and Verizon already control 73 percent of the nation’s low-band spectrum thanks to a government handout in the 1980’s, and asserts that T-Mobile and other small carriers are unable to compete on even terms against such “market dominance.”

    Currently, three out of seven “blocks” of spectrum are set aside for small carriers, but T-Mobile wants to increase the reserve to four blocks, according to comments the company filed with the FCC.

    Some experts, however, believe Legere’s claims are exaggerated, and say T-Mobile’s proposal would cost taxpayers money without making the wireless industry more competitive. (RELATED: The FCC’s Obsolete Wireless Competition Mindset)

    “It’s unlikely the FCC would improve outcomes if it begins divvying up spectrum based on favorites,” contends Bret Swanson, president of the technology research firm Entropy Economics LLC, in a blog post for Multi Channel News.

    For one thing, Swanson says there is no credence to the claim that T-Mobile was blocked by its larger rivals in the last auction, pointing out that, “T-Mobile was outbid by smaller Dish 132 times but outbid by AT&T just 26 times, and Verizon 16 times.”

    Moreover, he says AT&T and Verizon actually have less spectrum, on a per-subscriber basis, than do smaller firms like T-Mobile, and that Sprint, which did not participate in the AWS-3 auction, continues to own more spectrum than any other carrier.

    Swanson concludes that setting aside spectrum for certain bidders would undermine the whole purpose of spectrum auctions, which is “to encourage the best match of resources and capital.”

    Roslyn Layton, a PhD Fellow at Aalborg University in Copenhagen and a Visiting Fellow at the American Enterprise Institute, offered a similar analysis in February, telling The Daily Caller News Foundation that, “We have no proof that Verizon and AT&T did anything of a collusionary nature.”

    Layton also noted that T-Mobile “is buying extra capacity from Verizon and AT&T and selling it as their own … [so] from T-Mobile’s perspective, it doesn’t really matter who buys the spectrum, since they can just buy it from AT&T or Verizon later.” (RELATED: Verizon Wireless Looks to Sell Unused Spectrum for Billions of Dollars)

    “They don’t have to play the same game Verizon and AT&T are playing, and they shouldn’t be asking favors from the government and claim that they are abused, because it is not true,” she added.

    In a letter sent to Republican Sen. Dean Heller Tuesday, the CBO estimates that, based on the prices paid at the last auction, net proceeds from the next auction will range between $10 billion and $40 billion, depending on how much spectrum is offered for sale. That number could come down, though, if the FCC accedes to T-Mobile’s request and further restricts bidding on the part of the largest carriers.

    Follow Peter Fricke on Twitter


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