T-Mobile’s Ham Questions Timing of December’s Verizon/Cable Deals

Ham noted that the deals were announced in December while the AT&T/T-Mobile deal was on life support and about to expire. Verizon insists the deals show a secondary market for spectrum that’s working well, she said. “Secondary markets? Hello. T-Mobile and AT&T would have been part of that secondary market, if they just waited a few more weeks,” she said. “That didn’t happen, why? I don’t know why. DOJ’s looking into that.”

T-Mobile needs spectrum like the AWS licenses Verizon is buying from the cable operators, Ham said. “There’s a real spectrum crunch out there,” she said: “If the commission wants us around … they need to make sure everybody has a fair shot” at spectrum when it comes to market. Ham noted Verizon is getting the spectrum at a relative bargain price, 69 cents per MHz/POP for unencumbered spectrum versus the 64 cents MHz/POP T-Mobile paid for spectrum that still had to be cleared in the AWS-1 auction. Ham said she expects regulators to look carefully at whether Verizon is “warehousing” the AWS spectrum it already owns but has yet to put into play. “Verizon in their initial application said they weren’t going to use the spectrum until 2015,” she said. “We filed an opposition and all of a sudden it’s 2013. … I can promise you T-Mobile would put it to immediate use.”

Ham also said the 700 MHz A-block licenses Verizon announced Wednesday it will sell, should the AWS sales be approved (CD April 19 p1), are of limited value because of Channel 51 interference issues. She held up a map showing major markets where the problem remains. Encumbered markets were marked by big red dots. “Until you get rid of those red dots, you've got a problem,” she said.

"Our filings have addressed the claims, baseless and otherwise, that T-Mobile has made in the media and elsewhere,” a Verizon spokesman said in reaction to the T-Mobile comments. “Verizon Wireless is a good, efficient steward of spectrum, and we are confident that we've made a strong case that the spectrum sale in question is in the public interest and that consumers will benefit."

Szoka said the Communications Act makes clear in Section 310(d) that the FCC can review only the transaction before it, and not compare it to any hypothetical alternative use of the spectrum. Congress put the provision in the act for a reason, he said. “This is not an arcane legal point,” Szoka said. “Congress did not want the FCC using the merger review process to determine markets.”

David Kaut, analyst at Stifel Nicolaus, said he expects the sales to be approved. “We always thought there was going to be a lot of concern about this and it certainly has materialized,” he said.

Verizon isn’t offering the A- and B-block spectrum for sale because it hit a “roadblock” at the FCC on the Verizon/cable deals, Chief Financial Officer Fran Shammo said during the company’s earnings call Thursday. The AWS spectrum is just a better fit with Verizon’s C-band spectrum, he said. Shammo disputed reports that Verizon was conducting a spectrum “fire sale.” Verizon will only sell the A- and B-blocks if it gets the right price, he said.

The A- and B-block spectrum “does not fit as nicely into our spectrum holdings as it may for others,” Shammo said. “We think it’s the prudent thing to do, to sell these licenses off to the rest of the industry to the benefit of their customers and to enhance their ability to build out 4G LTE. We would say we're being good stewards. We did not just wake up yesterday and decide we were going to sell spectrum because we ran into a roadblock at the FCC.”