It hasn't threatened to sit out yet, but Verizon is none too pleased that federal regulators plan to forge ahead with restrictions that would keep the nation's top two wireless carriers from buying as much of the airwaves as they want in an upcoming auction.
The government auction would give cellular companies access to much more of the valuable (and finite) radio spectrum that carries phone calls, mobile data and other wireless communications. Carriers like Verizon and AT&T plan to use their newly acquired spectrum to upgrade their LTE offerings.
In a filing with the Federal Communications Commission Thursday, Verizon said it would be "perverse and unjust" to apply the limits on spectrum bidding, arguing they would unfairly benefit T-Mobile and Sprint because both are already backed by wealthy multinational parent companies.
"Adopting bidding restrictions proposed by competitors would reduce the amount of spectrum made available in the auction and would add to its complexity," Verizon wrote.
The FCC wants to impose the limits because it's concerned that the nation's dominant carriers — Verizon and AT&T — would otherwise out-bid the weaker companies and gain more leverage in the market.
Last week, the FCC publicly unveiled for the first time its proposal for the auction limits. In each market where the auction is taking place, all carriers will be allowed to bid on what will likely be seven blocks of spectrum, each measuring 10 megahertz, said wireless industry officials who spoke on condition of anonymity because the negotiations are private. (For comparison, a typical broadcast TV channel takes up 6 MHz. This is important, because the auction relies on broadcasters giving up their access to the airwaves in order to supply wireless carriers with new spectrum.)
Bidding will continue until a "trigger" is met. What factors will be included in the trigger are still being hammered out. But it will likely take into account how much revenue the FCC has pulled in from the auction, the industry officials said. Once a certain threshold has been met — say, once the FCC has raised enough to cover the costs of holding the auction and a number of other commitments — the restrictions will kick in.
At that point, any carrier that holds more than a third of the most valuable spectrum in a market would be prohibited from bidding on more than four out of the seven spectrum blocks. The other three would be reserved for other carriers that don't fit that description.
The idea is that by applying the restrictions on dominant carriers, the remaining competitive carriers would compete among themselves without the fear of the incumbents driving up the price beyond their reach.
"If that's how it stacks up," said Matt Wood, policy director of the consumer group Free Press, "what that would probably mean is that AT&T and Verizon could divide up between the two of them that unreserved portion" while the smaller carriers vie for spectrum in a sheltered pool.
AT&T and Verizon don't like that. They'd prefer to be able to buy up as much spectrum as they can afford, without interference. AT&T has threatened to pull out of the auction, thereby depriving the FCC of valuable auction revenue, if it doesn't get its way. That position seemed to soften somewhat in a recent investor call, with AT&T chief financial officer John Stephens emphasizing the company's cooperation in the negotiations.
"We would like to participate at the auction," Stephens said. "We are and have been working with the commission to establish auction rules that will certainly promote a good result for AT&T but will also promote a successful result for the auction."
Verizon didn't respond to a request for comment.