#competitivecarriers

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Consumer Protection or Protectionism?  The FCC’s Privacy Rules Might Provide Less Choice, and More Confusion, Than Consumers Expect

By Steven K. Berry, President & CEO, CCA

Consumer protection is a tricky thing.  Of course all consumers deserve adequate information and transparent practices, but consumer choice doesn’t have to come at the expense of receiving better broadband service, lower prices, or new and innovative technologies.  So when policymakers embark on a consumer protection mission, it seems only reasonable for the regulators to listen to what consumers want and need, and they should make sure protections are consistent across all platforms.  Federal Communications Commission (FCC) Chairman Tom Wheeler’s proposed privacy protections are a good example of how important it is to consider consumer expectations.  If you ask consumers whether they think all Internet companies, including ISPs like mobile carriers, should operate under the same set of privacy rules, over 90% would agree.  Further, 83% of all consumers agree that online privacy should be based on the sensitivity of their online data, rather than the type of company collecting that data.  In other words, consumers want one set of transparent and easy-to-understand rules. These statistics come from the Progressive Policy Institute’s recently-released survey of consumers’ privacy protection desires.  Hence, this survey should resonate with the FCC and should take heed that its current proposal will likely cause consumer confusion and result in less consumer protection.

The FCC’s proposed privacy rules—most recently outlined in a Fact Sheet released by the Commission—would require a mobile carrier to obtain customers’ express permission, or “opt-in,” to use, share, or permit access to categories of sensitive information like geolocation, children’s information, health information, financial information, social security numbers, the content of communications, but also all web browsing and app usage history.  The FCC regime also may require a carrier to allow a customer to “opt out” of first-party marketing based on non-sensitive information for any service not in the same category of “core” services ordered by the customer.  This means more administrative red tape for carriers with innovative service offerings—like “Internet of Things” products, or mobile device offerings—and existing partnerships that largely exist to provide consumers expanded services.  This will lead to more notifications that consumers will likely ignore or miss, and more lost opportunities to provide added value to existing services.  Do you really want the government to regulate whether you receive information, or a special discount, on the new iPhone or virtual reality equipment?  This consumer doesn’t.

Competitive mobile carriers—those outside the AT&T and Verizon “duopoly,” which commands more than 70% of all service revenue in the wireless market—would suffer the most if the FCC moves forward with its proposed rules.  Consumers want more content, smarter and cheaper devices, and opportunity for savings.  As such, carriers compete with edge providers like Amazon or Facebook, with broad access to consumer data under the FTC’s regime.  For example, imagine a consumer wants to buy a new tablet and their competitive mobile carrier offers tablets at 20% off sticker price.  Google might know that particular consumer wants to buy a tablet, based on their web browsing history, and would accordingly place targeted ads in the customer’s search results.  But under the FCC’s proposed rules, a carrier would likely have to get the consumer’s express permission to offer the same 20% tablet discount.  This does not foster competition; in fact, it provides consumers with fewer choices.

Competitive carriers should be able to explore new revenue streams by offering innovative and consumer-friendly products, services, and features to consumers, as long as a carrier does not use content of communications, web browsing history, or app use history data if it includes truly sensitive data such as precise geolocation, and information related to health, children, or finances.  This would align the FCC’s privacy framework with the principles applied by the FTC to the other actors in today’s data-rich Internet ecosystem.  The FCC also should follow the FTC’s lead and allow companies even more flexibility to market products and services to their customers, which is critical to an ISPs ability to compete.  After all, “competition, competition, competition” is Chairman Wheeler’s mantra.  A more flexible privacy protection regime will benefit carriers and consumers alike, giving both what they want and need.  I fear the FCC has forgotten that “an informed consumer is the best customer” and the FCC is making it difficult for consumers to be “informed.”

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CCA Supports Lifeline Reform that Puts Consumers First

By: Steven K. Berry, President & CEO, CCA

Today the House of Representatives will consider H.R. 5525, the “End Taxpayer Funded Cell Phones Act,” which aims to prevent consumers from receiving Universal Service Fund (USF) Lifeline program resources for mobile services.  While CCA supports appropriate USF reform, this legislation fundamentally misses the mark regarding the Lifeline program.  The Federal Communications Commission (FCC or Commission) recently implemented new program reforms to remove waste, fraud, and abuse from the program and Congress is working on productive reform efforts as well.  What’s more concerning, H.R. 5525 would put vulnerable Americans at risk of losing the ability to connect.  Further, this bill would create a new tax on telecommunications consumers.  It is for these reasons that CCA opposes this legislation.

Just a few months ago, the FCC adopted significant reforms to the Lifeline program to address perceived and actual waste, fraud, and abuse, and the Commission refocused the program via the Lifeline Modernization Order of 2016.  These changes reflect the continued increase in American consumers’ choice of mobile services to access voice and data products and services.  Ownership of a cell phone is no longer considered a luxury – it is a necessity for today’s on-the-go society, and smartphones can provide consumers with access to broadband without the need for an additional (and often costly) computer to use with a fixed connection.

H.R. 5525 not only ignores the exponential rate of mobile broadband adoption in recent years, but it also creates an undue new tax on American telecommunications consumers. By requiring providers to continue to contribute to USF and diverting funds to the U.S. Treasury for deficit reduction, the bill would take an existing user fee and convert it into an arbitrary new tax on telecommunications services.  Wireless consumers already contribute almost half of all contributions that make up the support for USF programs, more than any other telecommunications service, and placing a tax on-top of the user fee would serve to further diminish the vast benefits of USF for mobile services.

CCA fully supports efforts to root out waste, fraud, and abuse in the Lifeline program where appropriate, but this legislative approach uses a machete where a scalpel will do.  USF, including the Lifeline program, must support mobile broadband services to ensure that all American consumers have access to the latest technologies and services.  USF contribution reform efforts must equitably address the ongoing needs of the Fund, not create a new tax that will undermine the benefits of the USF program.

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Fact-Checking the Duopoly

By: Steven K. Berry, President & CEO, CCA and Rebecca Murphy Thompson, General Counsel, CCA | July 2, 2015

It should come as no surprise that AT&T and Verizon released interchangeable blog posts on the same day promoting anticompetitive myths and asserting false facts regarding the history-in the-making 600 MHz broadcast incentive auction.  It’s clear the duopoly is working in coordination to thwart competitive policies that provide consumers more broadband choice with increased competition, lower prices, and more innovative services from smaller, regional and rural carriers.  Interestingly, while the duopoly throws around phrases like ‘unmitigated gaul’ and ‘magenta herring,’ the truth of the matter is that AT&T and Verizon are attempting to deflect consumers’ attention from the true facts.  Particularly:

FACT: AT&T and Verizon together control 73% of all low-band spectrum in this country.

FACT: The upcoming incentive auction is the last near-term opportunity to gain access to low band spectrum. 

FACT: AT&T and Verizon together spent two out of every three dollars bid in the last spectrum auction, for a combined $28 billion dollars.  AT&T and Verizon foreclosed any meaningful competition from direct competitors in the AWS-3 auction by outspending all other facilities-based wireless carries by more than 10-to-1.  

FACT: The U.S. Department of Justice—for the third time—has gone on the record warning the FCC that AT&T and Verizon have the incentive to, and given the opportunity, will foreclose smaller carriers from getting access to low-band spectrum in the upcoming auction.

FACT: Studies have shown that competition can be a downward driver of consumer retail prices by 10-20%.  Studies estimate that mobile competition generates consumer benefits of $20 billion per year, worth over $200 billion in total.

FACT: AT&T or Verizon—and in some markets both—are eligible to bid on reserve spectrum covering 74% of the geography of the United States, and 40% of the population.

FACT: AT&T and Verizon are each eligible to bid on their desired 10x10 (20 MHz) block in every single market in the United States.

FACT: Many, many other reserve-eligible entities besides AT&T and Verizon (and T-Mobile) will likely bid on spectrum in this upcoming auction, from current operators to potential new entrants.  CCA represents more than 100 competitive carriers, all of which need access to low-band spectrum.  The upcoming incentive auction presents the last, best opportunity for carriers to get access to this much needed low-band spectrum.  And the market-based spectrum reserve is the only competitive safeguard in the auction that can prevent AT&T and Verizon from walking away with all of this critical resource.

FACT: AT&T and Verizon have claimed that a 10x10 MHz channel (or 20 MHz of spectrum total) is ‘table stakes’ for an LTE deployment.

Don’t be distracted by AT&T and Verizon’s shiny new hashtag.  Under the Commission’s current incentive auction proposal, the maximum size of the spectrum reserve—should it come into existence at all—is 30 MHz, which means that only one reserve-eligible bidder at most will get access to enough 600 MHz spectrum to deploy a robust LTE network.  Because AT&T and Verizon are reserve-eligible in so many parts of the country, and have the incentive to foreclose competitive carriers from getting access to this spectrum in the first place, the Commission should take action to increase the size of the reserve and make sure that AT&T and Verizon aren’t able to game the auction so that it is never triggered at all.

Competitive carriers aren’t asking for a hand-out, they’re asking for a fair shot. The spectrum to be offered in the incentive auction is expected to be some of the best spectrum in the world, and CCA’s members want a fighting chance to win some of it in the auction so that they can provide 4G LTE service to consumers and take part in the growing Internet of Things, which will improve everything from education and healthcare to agriculture and commerce.  Our members aren’t afraid of a little competition – after all they are the ones offering better prices and more innovative services.  And competition is the whole point of the FCC’s framework for this auction, answering clear Congressional directives.  It is plain and simple – AT&T and Verizon can squeeze out the competition by buying all the spectrum. The Commission should stick to its goals of promoting competition by non-nationwide providers, avoiding excessive concentration of licenses, disseminating licenses among a wide variety of applicants, and encouraging rapid deployment of new wireless broadband technologies to all Americans, including those residing in rural areas, by building on its framework with targeted improvements to prevent foreclosure from the duopoly.

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Incentive Auction Reserve Has the Potential to Produce a “Wide Spectrum” of Benefits

By: Steven K. Berry, President & CEO, CCA

AT&T’s chokehold on low-band spectrum resources prevents competitors from offering service in urban and rural areas alike.  Low-band spectrum travels farther and is less costly to deploy and operate, which is necessary to deploy cost-efficient mobile broadband in high-cost, low-density rural areas.  Low-band spectrum also penetrates obstacles better than higher-band spectrum, which allows service to reach inside buildings where 80% of all wireless data consumption occurs.  In the words of AT&T’s CEO Randall Stephenson, low-band spectrum “propagates like a bandit.” Together with Verizon, AT&T controls 73% of all low-band spectrum on a nationwide average basis and an even larger share in urban areas – a number that cannot and should not be ignored.

Despite these facts, in a (repetitive) blog AT&T says the way to improve consumer choice is by eliminating the market-based, pro-competitive spectrum reserve. Because the reserve is one of the most important consumer safeguards left against a single company acquiring all of the available resources needed to provide cost-effective wireless broadband service, AT&T is simply wrong.  

Most of Competitive Carriers Association’s (CCA) members are smaller wireless operators that serve rural markets.  As a group of our members explained in a recent letter to Chairman Wheeler, non-nationwide carriers strongly support the market-based spectrum reserve precisely because AT&T or Verizon are eligible to purchase reserve blocks of spectrum in the auction in most of the country. The map provided here shows that AT&T and/or Verizon can bid on reserve spectrum in markets covering almost three-quarters of the United States.

AT&T or Verizon Reserve Eligibility

AT&T attempts to turn this generally-applicable low-band spectrum reserve rule on its head, arguing that because it has only focused on deploying service in densely populated, high-revenue generating areas, and is therefore reserve eligible in certain rural markets, the spectrum reserve is no good. This argument fails for several reasons. First and foremost, AT&T conveniently forgets to mention that its duopoly partner, Verizon, is reserve eligible in many markets as well, making foreclosure a certainty without a larger reserve.

But more egregious is AT&T’s singular focus on T-Mobile, which ignores the more than 100 competitive wireless providers that operate today throughout the United States. In addition to current providers, there are potential new entrants interested in the adoption of pro-competitive rules for the incentive auction, such as cable provider Charter Communications. The fact is CCA expects robust participation in the forward auction, and if AT&T is permitted to bid on reserve spectrum in large parts of rural America, this makes increasing the size of the reserve all the more important.

Additionally, AT&T claims bidding eligibility throughout all or most of many states. While that’s generally true as indicated in the above map, AT&T in its blog conveniently ignores areas where they are ineligible due to significant low-band spectrum holdings.

AT&T also has touted the benefits of partnership opportunities with Verizon. But they conveniently forgot to mention CCA’s nationwide members’ partnering programs. Sprint and T-Mobile are partnering with smaller carriers in more equitable ways, providing greater access to spectrum, devices, and roaming that will allow competitive carriers to control their own destiny. But for these new and improved partnerships to continue, all competitive carriers need to be able to access critical low-band spectrum.

Our members are willing and able to compete head-to-head with AT&T and Verizon in the market; in fact, most do today. Any statements that suggest competitive carriers want to prevent AT&T and Verizon from acquiring additional spectrum are simply untrue. CCA members want AT&T and Verizon in the same competitive ecosystem that supports all wireless carriers. But our members are rightly concerned about the Big Two’s ability to foreclose competition by acquiring all or most of the available low-band spectrum or to prevent competitive carriers from acquiring anything other than the most impaired license blocks during the auction’s assignment round.  

If the spectrum reserve is not large enough to allow for more than one carrier to acquire enough spectrum to compete, AT&T or Verizon have the resources to acquire reserve spectrum in rural markets to prevent would-be rivals from competing.  This is a serious concern. Expanding the reserve from three to at least four blocks of spectrum while capping reserve purchases at two blocks per carrier does not harm AT&T, which concedes it can purchase reserve spectrum in the vast majority of the country.  Bottom line: an expanded reserve will provide enough headroom for competitive carriers to acquire the “table stakes” two-blocks of spectrum necessary to provide broadband service for consumers.

AT&T has a track-record of using its dominant position in the market to limit the utility of spectrum acquired by competitive carriers. In Auction 73, AT&T drove smaller carriers out of the smaller license-sized 700 MHz B Block into the more impaired larger license-sized A Block, and then carved up the band with false claims about risks of interference. As a result, handsets largely did not support 700 MHz A Block spectrum, which limited the utility and value of those licenses, and is still impeding robust LTE deployments in rural areas.

AT&T’s statements are particularly ironic in light of its history of broken promises to provide service in rural America. As a condition to the AT&T/BellSouth merger, for example, AT&T committed to provide broadband service to 100 percent of the residences living in the new company’s combined territory, most of which was rural. But AT&T now admits that it never lived up to its assurances of rural deployment. As another example, during AT&T’s failed attempt to buy T-Mobile USA, AT&T claimed the merger would benefit rural America when, actually, the proposed merger would have added less than 1% of new rural coverage area post-merger.

Rural consumers deserve better than AT&T’s unreliable statements and rock-bottom customer service.  A spectrum reserve of at least four blocks of spectrum – combined with a two-block limit on how much reserve spectrum any one carrier can purchase – will help offer rural Americans the same competitive choices and values that urban consumers enjoy.  Dozens of competitive carriers stand ready to offer alternatives to AT&T.  But first these providers must fight AT&T’s misinformation campaign to gain access the low-band spectrum resources they need to compete.  The Commission can improve consumer choice, encourage investment and accelerate wireless innovation in rural and urban areas alike by adopting a robust spectrum reserve of at least four blocks of spectrum, so that all carriers – even AT&T – can access this valuable, limited resource.

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Remember Alltel? A Prime Example Why Competitive Auction Rules are Necessary

By: Tim Donovan, VP of Legislative Affairs, CCA | 5.14.14

AT&T and Verizon frequently point to Sprint’s and T-Mobile’s decisions not to participate in Auction 73 for lower 700 MHz spectrum as justification for the FCC not to advance pro-competitive rules for future auctions. Every carrier must weigh business needs when deciding whether or not to participate in an auction, just as Sprint and T-Mobile did prior to Auction 73, and AT&T and Verizon did prior to Auction 96 (for H Block spectrum). What AT&T and Verizon conveniently dismiss are real examples of foreclosure including carriers that have actively participated in spectrum auctions, but have left empty – handed because they are unable to compete with the nation’s dominant carriers without competitive auction policies.

Rather than point fingers, it is more productive to examine how participants fared in an auction with structured rules ensuring competition versus an auction without competitive safeguards. Some of the most important lessons come from carriers who desperately needed spectrum and participated in auctions, but were unable to acquire the needed spectrum and promptly became a take-over target, unable to compete against the enormous resources of the two largest carriers. In light of the upcoming incentive auction – the next, and possibly final, auction for low-band (below 1 GHz) spectrum – policymakers should take a hard look at the consequences of carriers’ inabilities to win low-band spectrum.

For example, Alltel Corporation participated in Auction 73, the last major auction for low-band spectrum. In 2007, when the FCC was finalizing rules for Auction 73, Alltel was the fifth largest wireless carrier in the United States, serving over 12 million customers, many located in rural areas. Knowing the exceptional propagation characteristics of low-band spectrum, ideal for rural coverage and in-building penetration, Alltel expressed great interest in expanding its mobile services using the 700 MHz band, and made several recommendations to the FCC, including:

Creating multiple spectrum blocks using smaller, Cellular Market Area (CMA) geographic license sizes;

Rejecting blind and combinatorial or package bidding; and,

Considering eligibility restrictions on the two largest, ILEC affiliated carriers[1].

While the Commission auctioned one block of the Lower 700 MHz B Block in CMAs – which not coincidentally yielded by far the greatest revenue on a MHz-pop basis – the Commission failed to heed much of Alltel’s policy guidance. Nevertheless, Alltel participated in the auction, including one bid of over $600 million for the

Northeast Regional Economic Area Grouping

(REAG 001) covering Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, the eastern portion of Pennsylvania, Rhode Island, and Vermont. Alltel was willing to invest significant upfront capital to win spectrum that covered its home markets because it was that important to them to win spectrum. How did things turn out? Alltel was completely shut out of the auction. Alltel was simply unable to compete with the enormous resources of the two largest carriers. Following the auction even Senator Mark Pryor from Arkansas, home to Alltel’s Little Rock headquarters,

noted that

, “History will show that the way the FCC structured the auction basically helped the two big wireless companies [Verizon Communications and AT&T] to the detriment of competition in this country.”

Auction 73 closed on March 18, 2008. On June 4, 2008 – 78 days later –Alltel was acquired by Verizon.

Fast forward to present day. The two largest carriers, Verizon and AT&T, have nearly doubled in size, and the fifth largest remaining carrier has approximately half the number of subscribers as Alltel had before Auction 73. As we are hours away from the FCC’s vote on the first set of rules for the next, and possibly final, auction for low-band spectrum, policymakers must remain cognizant of the competitive impact that their decisions have on the wireless market and in turn consumers’ competitive choices. They would be wise to support a competitive auction structure so that remaining competitive carriers, many of which provide robust mobile broadband services in rural areas, have meaningful opportunities to bid and a legitimate chance to win needed spectrum. The FCC should do everything in its power to prevent circumstances that Alltel experienced. As the Department of Justice today reaffirmed, “the Department believes it is essential to maintain vigilance against any lessening of the intensity of competitive forces, or reduction in the number of effective competitors, in the wireless industry.”

Fortunately, the FCC has proposed rules that can create a competitive auction, providing all carriers with an opportunity to win spectrum. The FCC’s proposed rules include:

–        Auctioning spectrum in Partial Economic Area geographic license sizes, a compromise between very large and reasonably smaller license sizes; and

–        Reserving a limited amount of spectrum for non-dominant carriers after threshold revenue targets are reached.

The FCC will likely decide rules regarding combinatorial and blind bidding another day, however CCA cautions policymakers not to promote these procedures at the expense of competition.

CCA supports structuring a successful auction that raises significant revenue for FirstNet and the US Treasury, while fostering competition in the wireless industry.   We look forward to continuing to work with policymakers to craft a competitive auction – before the next Alltel is driven from the market at the expense of competition, rural customers, and ubiquitous mobile broadband service.

[1] Notably, Alltel opposed overbroad restrictions that would exclude or prevent AT&T and Verizon from participating in the auction entirely.

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Rural America will Benefit from Competitive Carriers’ Access to Additional Low-Band Spectrum

FCC’s Incentive Auction Plan Presents Real Opportunities for Smaller Carriers

By Steven K. Berry, President & CEO, CCA | 5.9.2014

May 9, 2014 – The 600 MHz incentive auction is not about the largest one or two – or even four – carriers. It is about all carriers that need low band spectrum to compete – including CCA’s more than 100 carrier members, many of which serve the most rural and hard-to-reach areas of the United States. More importantly, the incentive auction is about consumers, and meeting all of their mobile broadband needs. When competitive carriers have the opportunity to bid on and win much-needed low band spectrum, rural America wins, too.

The Commission’s proposed rules to reserve at least 30 MHz after the auction surpasses certain revenue targets guards against excessive spectrum concentration in the 600 MHz incentive auction. Ensuring that the two nationally dominant carriers cannot prevent competitive carriers from acquiring the low-band resources they need to compete will accelerate innovation, expand consumer choice, and stimulate competition among wireless broadband providers.

AT&T pundit Fred Campbell is simply wrong when he assumes that the FCC’s pro-competition rules are intended to ensure one or two particular carriers win. The FCC’s proposed incentive auction rules simply create a reserve of licenses to prevent any already-dominant carrier from, as Chairman Wheeler said, “sweeping the auction” and taking home all or most of the licenses available.

CCA members are fiercely competitive, ardently independent companies, who have deployed wireless services in some of the most rural parts of the country and are more than willing to pay their fair share for valuable spectrum. Competitive carriers bid aggressively in Auction 73, including nearly $2 billion in winning bids from CCA members. As a result of the Lower 700 MHz auction, CCA members understand the significance of the 600 MHz auction and the need to be a part of the 600 MHz ecosystem. This auction may be the last chance for competitive carriers to strengthen and expand their service to rural customers by harnessing the unique propagation characteristics of 600 MHz low-band frequencies that make it possible to serve rural customers in a much more cost effective manner.

CCA’s members want a fair shot at bidding on 600 MHz spectrum, and are encouraged by the competitive opportunities fostered by the FCC’s proposed rules. Countless other rural interests have joined CCA and its member companies in speaking forcefully – and passionately – about how much the 600 MHz auction will mean to rural America. Providing competitive carriers with a real opportunity to win spectrum will encourage them to participate in the auction, which will, in turn, expand broadband deployment while driving revenues to the US Treasury. That’s a win for rural America, a win for the economy and a win for public safety.

The wireless industry is at a critical crossroads – one road leads down a continued path towards a duopoly, and the other leads to a more competitive industry. With its proposed incentive auction rules, the FCC is clearly choosing competition. But there is still work to be done.

Building on its proposed framework, the Commission should account for the effects of national market power during the auction, as the Department of Justice recommended, by adopting a national eligibility requirement for reserved spectrum in addition to a local eligibility requirement. A dual eligibility requirement would more accurately reflect market power while still allowing the two largest carriers to bid on reserved blocks of spectrum in local markets where they do not hold excessive low-band spectrum. Similarly, competition would be enhanced if the Commission reserved more licenses for competitive access by allocating an odd number of unreserved licenses, which would force the largest carriers to compete with each other and generate more revenue in both the reserved and unreserved blocks.

The FCC’s proposed plan presents opportunities for all carriers to participate in the auction – including more than a hundred smaller and rural carriers Campbell conveniently fails to acknowledge.   We look forward to an auction where every competitive carrier can compete and win valuable low-band spectrum to expand the reach of wireless broadband service throughout the United States.

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AT&T Fearful of Market Domination by Small Rural Carriers

By: Rebecca Murphy Thompson, General Counsel, CCA | May 7, 2014

Have you ever heard of Union Wireless? Unless you’re from Wyoming, chances are probably not. According to AT&T, though, you should be concerned – very concerned – about Union Wireless.

AT&T has more than 116 million mobile subscribers, captures some 40% of allwireless revenue, and is one of the world’s largest wireless operators. Family-owned and operated Union Wireless provides wireless service throughout the state of Wyoming and in few counties in some neighboring states. The company has fewer than 500 employees and made news recently from its sponsorship of the 2014 Bridger Valley Jackalope Jump, where participants jump into freezing water to raise money for the Special Olympics.

Recently, AT&T started lobbying to have the same rules intended to curb the market dominance of AT&T apply to Union Wireless and other small carriers that serve rural communities.   The crux of AT&T’s argument is that Union Wireless, which provides cellular service to towns like Medicine Bow (population 284) and Frannie, Wyoming (population 157), has as much ability to exercise anticompetitive market power as AT&T.

It’s an extraordinary claim, even by AT&T’s standards. But AT&T’s lobbying gambit is driven out of fear – fear that reasonable low-band spectrum aggregation limits currently under consideration by the Federal Communications Commission might finally create enough breathing space for competitors to challenge AT&T’s and Verizon’s national market power.

In just over a year, the FCC plans to hold a voluntary incentive auction for broadcasters to sell their 600 MHz spectrum to be repurposed for broadband use. This 600 MHz low-band spectrum is ideal for both urban and rural broadband coverage because low-band spectrum travels longer distances and penetrates buildings and other obstacles far more readily than higher-band spectrum. Using low-band spectrum results in substantially lower deployment costs, which make providing service to less densely populated areas of the country economically sustainable.

As of a year ago, AT&T and Verizon held licenses for approximately 90% of Cellular (800 MHz) spectrum and 84% of Cellular and 700 MHz bands, for a combined total of 78% of nationwide low-band spectrum. And those percentages keep growing as the largest two carriers continue to aggregate low-band spectrum resources. CCA represents more than 100 competitive carriers. Some CCA members hold low-band spectrum; others do not. Nevertheless, the amount of low-band spectrum held by CCA members is dwarfed in comparison to the low-band spectrum held by the Twin Bells, AT&T and Verizon. As a result, CCA has consistently argued for low-band spectrum aggregation limits to provide assurance that our small and rural members will not be foreclosed from this valuable 600 MHz spectrum. To expand competition in rural markets and prevent one or two carriers from running the table at the auction once certain revenue thresholds are met, the Commission is considering “reserving” a limited amount of spectrum available for bidding by carriers that possess little or no low-band spectrum. CCA enthusiastically supports the Commission’s proposal to limit the amount of spectrum any one carrier can acquire in the incentive auction. Aggregation limits help ensure that competitive carriers are not kept from accessing a resource they require to effectively compete in their home markets.

If past is prologue, foreclosure is not only a possibility, it’s a probability. AT&T single-handedly kept $2 billion in investment in low-band spectrum stranded on the sidelines for several years by derailing interoperability in the Lower 700 MHz Band, effectively prohibiting rural consumers’ access to the latest devices and fastest LTE service.  It was only on the eve of Commission action under Acting Chairwoman Mignon Clyburn that AT&T acquiesced to an industry-driven solution. This costly delay to broadband deployment proves why it is so important that competitive carriers have a fair shot at entering the 600 MHz ecosystem.

The current FCC spectrum aggregation proposal would determine reserved license participation only on a local market basis and ignore the effects of national market power. Under these rules, many small and rural wireless carriers – including Union Wireless – would face limitations in their home markets even though they come nowhere close to holding national or local market power.

Under the FCC’s current proposal, Union Wireless would be kept out of reserved spectrum in a core market, while AT&T would be eligible to bid on reserved spectrum in that market. Surely the Commission does not intend to put a small, rural competitor in the same (or worse) position than a better capitalized, dominant carrier like AT&T? Doing so unnecessarily penalizes small businesses focused on providing high-quality service in their home markets, like Union Wireless, while ignoring national market power.

Adding a national eligibility requirement as a prerequisite to limiting a carrier’s eligibility to bid on reserved spectrum blocks keeps the focus on national market power, where it belongs. Focusing on national market power also recognizes that, unless we create space for companies like Union Wireless to flourish, AT&T could box out small rural competitors from the 600 MHz ecosystem any time it chooses.

This approach has a proven track record. The Department of Justice reviews national and local market effects in its antitrust analysis of mergers and acquisitions and the DoJ recommended the FCC review both national and local effects of spectrum aggregation using both a national and local standard. Regulators in Canada, meanwhile, adopted just this test in their recent successful 700 MHz auction, applying a national test of market power (a 10% share threshold) and a local trigger (a 20% threshold in a particular license area) to determine eligibility for certain blocks of spectrum.

Distinguishing a company without market power from one with enormous market power is not a double standard; it’s common sense. Well-designed limits on spectrum aggregation in the incentive auction will drive up auction revenues and promote competitive access. CCA’s proposal shows that neither of these benefits has to come at the cost of preventing small and rural carriers, like Union Wireless, from better serving their communities.

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All Carriers Must have the Opportunity to Participate in the Upcoming Auction; Not just AT&T

By Steven K. Berry, President & CEO, CCA

April 16, 2014 – Earlier today, AT&T filed an ex parte with the FCC essentially threatening to sit out of the upcoming 600 MHz spectrum auction because AT&T is not getting everything it asked for.  Is anyone really surprised by AT&T’s reaction?  I, for one, am not – this is simply more of the same from the nation’s second largest carrier.  The FCC is trying to create a pro-competitive auction that gives every carrier an opportunity to bid on and win much needed interoperable low-band spectrum.  Using a bright-line limit of the amount of spectrum any one carrier can acquire, after achieving sufficient competition in the auction, is one way to foster competition.  Another way to address current inequities is to use a nationwide MHz population-weighted spectrum screen, which is one of the options CCA has proposed.  AT&T and Verizon own almost 80% of all low band spectrum nationwide – a fact that AT&T time and again tries to downplay by claiming that low-band spectrum isn’t that much different from high-band spectrum, despite its continuing attempts to aggregate low-band spectrum.  The FCC’s aggregation framework will help competitive carriers get access to critical low-band spectrum necessary to compete in a 4G-LTE market.  Let’s not forget that the ultimate goal is to bring high speed broadband services to every American in all areas – rural, suburban and urban.

AT&T’s letter filed today fails to recognize that carriers can aggregate across spectrum bands, so AT&T could in fact use spectrum in its current portfolio at 700 MHz and aggregate at 600 MHz.   With the right incentives, the FCC could realistically clear 70 MHz of auctionable 600 MHz spectrum, which would allow AT&T to acquire in the incentive auction up to 40 MHz of unreserved spectrum.  That’s a lot of spectrum of any one band, especially 600 MHz spectrum, considering the superior propagation characteristics.   And it fulfills AT&T’s stated demand for 10 x 10 or larger allocations.  If it truly values low-band spectrum, AT&T will compete vigorously to acquire this spectrum.  From its statement, it appears AT&T doesn’t want to compete for the spectrum, but rather walk away with superior low-band spectrum for a song, shutting out its competitors from the ecosystem, just like it did in the 700 MHz spectrum for years.

AT&T continues to oppose any limitations or eligibility rules that might bring multiple carriers into the auction and access to low-band 600 MHz spectrum. Threatening not to bid in the auction unless it gets its way rings hollow and is more like a chest-thumping roar of disappointment over pro-competitive policies that will nurture a successful auction.