The FCC has long relied on a spectrum aggregation tool to assess any transaction where an applicant is acquiring or gaining leased rights for spectrum.  The tool, triggered when an entity’s spectrum holdings would exceed a specified level, is designed to evaluate whether any one entity’s wireless license holdings would cause competitive harm. If the Commission determines that an entity’s acquisition will have an anti-competitive impact on any specific market – which it has previously done when the acquisition materially exceeds the defined thresholds – it can require that entity to divest a portion of its holdings or bar additional acquisitions in the relevant areas.

T-Mobile has historically been one of the loudest proponents of aggressive application of the spectrum screen to prevent spectrum acquisitions.  However, in the wake of its acquisition of Sprint (in which the FCC declined to require any divestitures), T-Mobile itself now exceeds the Commission’s screen by an unprecedented margin throughout much of the country.  And T-Mobile continues to add additional spectrum to its hoard.  Additional spectrum leases with Dish will cause T-Mobile to exceed the 250 MHz screen by as much as 136 MHz.

Given this unprecedented level of spectrum concentration in the hands of a single carrier, we have entered a new era for the FCC’s spectrum acquisition analytical tools.  The Commission must now take action to reaffirm the importance of a spectrum aggregation tool and define a meaningful approach going forward. 

In comments filed today, AT&T argues that the FCC should carefully consider both short and long-term questions.  First, it needs to explain how the spectrum screen was applied to the leases which are the subject of a petition for reconsideration filed by Verizon.  The Commission has long sought to provide transparency and predictability in how it analyzes secondary market spectrum acquisitions and leases.  Here, however, given that there was no order on the approval, we have nothing but a black box.  The industry is entitled to understand how the Commission analyzed a transaction that allowed an entity that exceeded the screen in a market to exceed it even further.

The FCC should not only clarify how the screen was applied in the leases, but it should take this opportunity to provide guidance on how the screen will be applied moving forward.  If the spectrum screen is to continue to have meaning, the Commission needs to explain how it will be applied so there is some clarity on when, and under what circumstances, entities will be permitted to continue to amass holdings in excess of the screen.  Absent such clarity, the screen will become an empty vessel.

Finally, the Commission owes bidders in the upcoming C-Band auction guidance on how it will apply the screen in the context of that auction, so bidders can make informed decisions.  The Commission has not yet had the occasion to apply the screen in an auction under these circumstances, nor has it explained in any detail how it would do so. An auction raises fundamentally different questions than a secondary market transaction, and presumably the FCC’s approach would reflect that. Without further guidance, however, bidders are left in the dark. This analytical foundation cannot wait until after the auction before it is disclosed.

In short, the FCC is at a crossroads.  If the Commission will continue to rely on the screen as a meaningful analytical tool, a refined approach should be developed and clearly communicated so the tool can continue to serve as a means of promoting and protecting competition.

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