T-Mobile won by far the lion’s share of licenses in the FCC’s 2.5 GHz auction, but AT&T is saying “not so fast” in terms of the government granting them.
The auction, which closed in late August, raised a total of $428 million, most of which came from T-Mobile.
T-Mobile already has a huge position in the band, thanks to its acquisition of Sprint. AT&T argues that the FCC should deny T-Mobile’s long-form application or condition its grant on T-Mobile’s divestiture of some mid-band spectrum “to avoid harm to competition and the public interest.”
It’s an issue that has come up in the past. In a petition filed last year, AT&T urged the FCC to implement a spectrum screen for mid-band frequencies, in part citing T-Mobile’s large holdings.
AT&T is asking the FCC to revisit that petition.
“The 2.5 GHz auction has come and gone, and T-Mobile predictably emerged as the easy winner. With this long-form application, it is poised to win 90% of the available 2.5 GHz licenses for $304 million—orders of magnitude below the bid levels in prior, competitively neutral auctions—and perfect its long-term strategy to keep its competitors from closing the mid-band spectrum gap,” AT&T told the commission in its November 7 filing, which Communications Daily previously reported on.
The filing notes that counting all auctions except this one, the remaining three nationwide facilities-based carriers have the following mid-band assets on a weighted average basis:
- T-Mobile: 205 megahertz (165 megahertz of non-auctioned 2.5 GHz spectrum in the 2.5 GHz band, 27 in the C-Band, and 12 in the 3.45 GHz band).
- AT&T: 120 megahertz: (80 in the C-Band plus 40 in the 3.45 GHz band).
- Verizon: 161 megahertz: (composed entirely of C-Band).
According to AT&T, T-Mobile’s claim that it has locked in a spectrum advantage for “the entirety of the 5G era” should raise “significant concerns because there is no new mid-band spectrum in the auction pipeline that could equalize the current imbalance in mid-band assets.”
AT&T also complains that T-Mobile has told different audiences two contradictory stories about the competitive significance of its spectrum holdings. To policymakers, T-Mobile presents itself as a “scrappy and under-resourced upstart” struggling to compete against Verizon and AT&T. But it tells investors the opposite, boasting about its spectrum advantage over the other two and how its rivals don’t have a path to match T-Mobile anytime soon.
T-Mobile: Petition is “absurd”
In its response, T-Mobile said that AT&T’s petition “was plainly a calculated attempt to impede competition.”
“The petition absurdly boils down to a claim that T-Mobile paid too little for spectrum as part of a plan to make AT&T pay too much,” T-Mobile said in a November 14 filing. “There is no plausible foreclosure strategy at work in an auction where the total amount of T-Mobile’s winning bids is small in scale ($304 million) compared to the rival’s investment plans ($24 billion in 2022), and AT&T sat out the auction.”
T-Mobile also said AT&T’s request boils down to an attempt to rewrite the rules for an auction that already occurred. It calls it a delay tactic to prevent T-Mobile from deploying the 2.5 GHz spectrum to deliver its new Home Internet service, particularly in rural areas, where T-Mobile is competing more aggressively than ever against AT&T.
“Clearly, the minor, incremental screen overages resulting from the spectrum T-Mobile won at auction raise no competitive concerns,” T-Mobile told the commission.
Chances of success?
Interestingly, analysts at New Street Research (NSR) don’t think AT&T’s challenges to T-Mobile will be successful, and they cite a number of reasons.
For one, the FCC generally regards the 2.5 GHz band as part of mid-band spectrum, and in that larger band, AT&T has been able to aggregate more spectrum than T-Mobile, NSR policy analyst Blair Levin wrote in a report over the weekend. Further, AT&T previously opposed the kind of band-specific aggregation limit it proposes here, he said.
Plus, the FCC has never previously imposed a post-auction spectrum aggregation limit and “we don’t think it will do so here, as doing so would undercut the bidding certainty that is essential to a successful auction,” he said.
AT&T didn’t participate in the auction, which likely undercuts its credibility on the issue with the commissioners, and AT&T executives have publicly said – during presentations to investors – that it has a sufficient and advantageous spectrum position, undercutting its argument about T-Mobile’s spectrum advantage, the NSR report said.
NSR said they’re not sure why AT&T is pushing the issue, but it might be to slow the rollout of T-Mobile’s home broadband service in AT&T’s wired footprint, and/or AT&T is raising the issue to establish a precedent that might be useful when the next spectrum auction occurs.
Whatever the reason, “its odds of success in having this petition granted are very low,” Levin said.
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