White House pushing ahead with airwaves auction plan

This story ran in the print edition of today’s paper:

The Obama administration will make an economic case Wednesday for moving ahead with a controversial auction of broadcast airwaves, even as some analysts argue that AT&T’s proposed merger with T-Mobile throws a wrench into the plan.

The administration’s goal to blanket the country with wireless high-speed Internet connections has been pitched as an economic opportunity to create high-tech jobs that also help the U.S. compete globally.

To carry out that goal, Obama said he hopes to raise $27.8 billion over the next decade from auctions of broadcast channels that would be converted into wireless networks to connect smart phones and tablets to the Internet.

At a White House meeting on the plan Wednesday, the administration will present a letter of support signed by more than 100 economists who say the auctions are the best way to create new mobile phone networks and would “increase social welfare.”

But the plan appears to face new challenges because of AT&T’s recent proposal to take over T-Mobile for $39 billion, experts say.

The merger could slow progress toward the administration’s goals and could “alter the current spectrum debate in Washington,” Rebecca Arbogast, an analyst at Stifel Nicolaus, said in a recent note. “If these two companies can satisfy much of their spectrum needs by joining forces, it would reduce some of the demand for new spectrum and possibly lower auction revenue estimates.”

The merger would reduce the number of major national carriers from four to three. The money from the auction is to be used to pay back the broadcasters who give up spectrum, to expand wireless connections to rural areas and to pay for an emergency public safety network.

An administration official who was not authorized to speak on the record dismissed the merger’s impact on Obama’s wireless agenda.

“Our focus is on enabling the access of spectrum to as many bidders as possible,” the official said. “We have to leave it to antitrust authorities to evaluate any mergers, but we believe the demand and appetite under any scenario is going to be considerable.”

AT&T said it wants to buy T-Mobile so that together, with 130 million subscribers and more spectrum, they can compete against Verizon Communications. It said it supports the president’s plan for auctions.

“The spectrum crisis is real and could impact investment and jobs if Congress doesn’t act quickly,” said Michael Balmoris, an AT&T spokesman.

Sen. John D. Rockefeller IV (D-W.Va.) introduced a bill that lets the Federal Communications Commission conduct the auctions. But lawmakers also want to scrutinize the huge telecom deal. The Justice Department and FCC will review whether the merger would have anti-competitive effects or would harm the public’s interest. The reviews could take as long as 18 months, analysts project.

All the attention on the transaction will give Rockefeller’s bill and other legislation a 35 percent chance of passing this year, MF Global analyst Paul Gallant said in a recent research note.

The merger could be read by some in Congress as, ‘Do we need to pass controversial spectrum legislation when AT&T is saying the T-Mobile deal gives it access to more spectrum?’ ” Gallant said.

The plan had been criticized for its complexity. There are several steps to the auction process. An administration official estimated it could take at least three years before any radio waves are put on the block.

And broadcasters are lobbying lawmakers for legislation that protects their interests. They want to be ensured they aren’t forced to give up airwaves or move to junk channels on low-quality bands.

Ahead of the 2012 elections, their message may get more attention from legislators who rely on broadcast television for political ads, experts say.

“This letter and event at the White House makes me think right off the bat that they are worried they can’t get legislation through to pull this off,” said Jeffrey Silva, a senior technology policy director at Global Medley Advisors.

Cecilia Kang is a senior technology correspondent for The Washington Post.

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