Please attribute the following testimony to AT&T’s Joan Marsh, Vice President of Federal Regulatory:  

Thank you Chairman Walden and Ranking Member Eshoo for inviting AT&T to join in the discussion today. 

To quote former FCC Chairman Julius Genachowski, “this is a big deal.”  The 600 MHz auction presents the next, best opportunity to reallocate valuable spectrum for wireless broadband use, and could be the only one like it for years to come.

But this auction is not just about new wireless spectrum allocations.  It is also about critical public safety goals.  In order to be deemed a success, the auction must generate up to $7 billion to fund construction of the first nationwide, interoperable, wireless broadband public safety network.  Auction revenues will also support broadcaster relocation, public safety research, next generation 911 services, and much needed deficit reduction.  

The importance of these goals has been underscored by both sides of the aisle in letters to the Commission urging them to adopt policies that will enhance the ability of the auction to meet these critical statutory objectives.  We agree.

But success in meeting these goals is by no means a guarantee.   This is by far the most complex auction proceeding ever undertaken.  The Commission must persuade two different sets of auction bidders to participate in two separate but inter-related auctions.  In the face of this enormous complexity, there are a few straightforward principles that should guide decision-making at every turn.  I’d like to discuss the most important of those principles today.

The primary principle is straightforward:  allow free and open participation in the auction by all qualified bidders.  This approach is the only one that will maximize auction revenues and thereby maximize the chances for an auction that achieve all of Congress’ stated goals.   If qualified bidders are excluded or limited in their bidding activity, less spectrum will be relinquished by broadcasters, the spectrum that is offered will sell for lower prices, and the chances for a successful auction will be diminished.

Unfortunately, as is always the case in regulatory proceedings of significant import, there are some who want the Commission to game the rules to favor certain competitors over others.  These proposals vary in their specifics but they share a common theme:  restricting AT&T and Verizon from fully participating in the auction, while steering spectrum to other bidders, in particular, Sprint and T-Mobile, neither of which participated in the last major auction the FCC held.

These proposals are as ill-advised as they are unlawful.  For starters, they are unnecessary.  Sprint already has by far the largest spectrum portfolio of any U.S. wireless provider, vastly exceeding that of both AT&T and Verizon.  Indeed, given this, it is by no means certain that Sprint will choose to participate in the 600 MHz auction.  Sprint also has at its disposal substantial new capital resources from its owner, Japanese-based Softbank, to fund any future spectrum purchases it might choose to make.

For its part, T-Mobile is owned by Deutsche Telekom, one of the largest telecommunications companies in the world.  It too has recently acquired substantial amounts of new spectrum, including from AT&T, Verizon, and the former MetroPCS. 

In short, there is no basis upon which to conclude that Sprint and T-Mobile have a greater need to win spectrum at this auction than any other bidder.  More importantly, to the extent these carriers choose to participate, there is no basis to conclude that they lack the resources to bid competitively and win absent auction rules that make it easier and cheaper for them to do so.

Conversely, restricting or limiting bidder participation will come at a heavy price.  If AT&T and Verizon are restricted or relegated to a separate shadow auction with its own set of rules, spectrum values at auction will be suppressed and revenues reduced.  This result would effectively ask US taxpayers to subsidize the auction, undermining the auction’s revenue goals, including that of deficit reduction.  Such rules could also impact the calculation that broadcasters will make in deciding whether to participate at all. 

For these reasons, AT&T has urged the Commission to adhere to its statutory mandate and conduct an open and competitive auction that awards spectrum to the highest bidder.  That approach is not only consistent with the law, but it would also offer the best prospect for a successful auction that meets all of Congress’ goals.

My written testimony includes comments on other areas of great interest to AT&T, including the band plan, the need to get the engineering right, the efforts by the industry to find consensus, and the role unlicensed services can play in this auction.  As to broadcaster participation, AT&T believes that broadcasters who come to the auction table are not selling a broadcast business.  They are relinquishing their rights to 6 MHz of spectrum much needed for mobile wireless use.  Any valuation mechanism adopted in the reverse auction should be consistent with that reality and opening prices should be set at a level that will encourage participation. 

In conclusion, this auction presents enormous opportunity and risk.  The stakes are as high as the issues are complex.  AT&T remains confident that under the able leadership of Chairwoman Clyburn, Commissioners Pai and Rosenworcel, and Commission Staff, the FCC will adopt auction rules that maximize participation and the prospects for a successful auction with all the attendant benefits Congress envisioned.  Thank you for your time.

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