The ever colorful tweets from T-Mobile CEO John Legere made for interesting reading after his DC tour last week in support of T-Mobile’s quest to expand the 600 MHz spectrum reserve.  T-Mobile has long alleged that an expanded reserve is essential to competition in rural America.  But, the fact is that the reserve framework will have very little impact on wireless service or deployment in rural America.  As I explain below, in many rural areas, AT&T’s low-band portfolio is simply not sufficient to trigger the auction restrictions so our bidding in most rural areas will not be restricted, regardless of the size of the reserve.

What the restrictions are actually designed to do is protect T-Mobile from bidding competition in urban markets – even though T-Mobile itself argues that 92% of non-rural Americans have access to four or more mobile broadband providers.  Only 40% of rural Americans, T-Mobile argues, enjoy the same and thus T-Mobile tries to build a case for expanding the restrictions to support deployment in rural America.

To understand why T-Mobile is wrong – and why the reserve framework is not likely to have much impact on bidding in rural markets – we need to discuss how the reserve framework is structured.

The FCC has set a low-band spectrum threshold and declared that any large carrier that exceeds that threshold in a license area will not be permitted to bid on the spectrum blocks in the set aside or reserve for that area.  Since small carriers are carved out of this restriction, the restriction only impacts AT&T’s and Verizon’s ability to participate in the auction.  To understand the true impact of the restrictions, one must therefore examine where a bidder triggers the FCC’s threshold so its bidding will be restricted.

For AT&T, the restrictions will predominantly impact our ability to compete for spectrum  in urban areas.  Indeed, our preliminary analysis suggests that we will be restricted in all Top 50 markets except six (Cleveland, Phoenix, Virginia Beach, Charlotte, Raleigh and Greenville to be exact).  The restrictions will therefore directly impact our ability to serve customers in the most data hungry markets like NY, Los Angeles, Chicago, San Francisco, Baltimore-DC, Philadelphia, Boston and Dallas.

In many rural areas, on the other hand, AT&T’s low-band portfolio is not sufficient to trigger the restrictions so our bidding in those areas will not be restricted.  Consider the following states:

Maine:  We will not be restricted in either of the two license areas in Maine (or the one PEA in Vermont).

Iowa:  The FCC has identified 16 license areas in Iowa and we will be restricted in none of them.

Nebraska:  No restrictions in the 9 license areas in Nebraska.

Indeed, our review suggests that we will be largely unrestricted in most license areas in Kentucky, Montana, Oklahoma, the Dakotas, Tennessee and Wyoming.  Not so in NY, LA or Chicago.

Thus, an expanded spectrum set-aside is not about serving rural America.  It’s about protecting T-Mobile from competitive bidding in the most urban markets in the country – markets where T-Mobile is currently competing very effectively and boasting about having the deepest spectrum portfolio per customer and the fastest LTE networks in the industry.  And, for all its arguments about how essential this spectrum is to its future, recall that the last time the FCC held a low-band spectrum auction T-Mobile couldn’t be bothered to show up.   And, with Sprint — who hasn’t shown up for a FCC auction since the PCS days — signaling  that it will not participate in this one either, it’s becoming more and more difficult to find a rational argument for why a reserve is justified at all.

Notably, there is no reason to believe that, if either carrier was really interested in obtaining low-band spectrum for a rural deployment, they could not have done so.  Some months ago we posted a blog demonstrating that smaller carriers have in fact successfully accessed low-band spectrum in rural markets in auctions (without any restrictions or set asides), on the secondary market and through partnerships and affiliations, like Verizon’s LTE in Rural America program.    T-Mobile itself has been busy on the secondary market rolling up a footprint in the 700 MHz A block.

T-Mobile is thus misleading policymakers when it advocates for a bigger spectrum set aside in the name of rural competition.  Instead of falling for that magenta herring, policymakers should be inviting all bidders to compete for rural licenses that come with stringent build requirements.  That would ensure that the spectrum goes to the bidders most likely to make the capital commitments necessary to deploy rural services.  That approach would be a far better and more direct way of encouraging broadband deployment in rural America.


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