DOJ Raises Spectrum Aggregation Concerns in Filing at FCC

"The Department believes that a set of well-defined, competition-focused rules for spectrum acquisitions, particularly in auctions, would best serve the dual goals of putting spectrum to use quickly and promoting consumer welfare in wireless markets,” DOJ said (http://bit.ly/ZeKwIF). “The Department of Justice’s principal concern is that acquisitions of spectrum, whether at auction or through subsequent transactions, should not be used to create or enhance market power.”

DOJ said the FCC should keep in mind that carriers may buy spectrum primarily to keep it out of their competitors’ hands. “In a highly concentrated industry with large margins between the price and incremental cost of existing wireless broadband services, the value of keeping spectrum out of competitors’ hands could be very high,” the filing said. “A large incumbent may benefit from acquiring spectrum even if its uses of the spectrum are not the most efficient if that acquisition helps preserve high prices. Accordingly, the Commission should consider the potential that the acquisition of specific blocks of spectrum may have to foreclose or raise the costs of competitors in its policies on spectrum acquisition.”

Frequency matters, DOJ said. “Different bands of spectrum have characteristics that may have a crucial bearing on how the allocation of spectrum affects the competitive landscape. In particular, the propagation characteristics of low-frequency spectrum permit better coverage in both rural areas and building interiors.”

A Verizon spokesman declined to comment. An AT&T spokesman cited a January blog posting by Vice President Joan Marsh questioning the motives of other carriers pushing for limits on how much spectrum AT&T can buy. “In the midst of a prolonged and deep national recession, the U.S. wireless industry has generated billions of dollars of investment capital, produced millions of jobs, and spawned a breathtaking array of innovative new consumer products and services,” Marsh wrote (http://bit.ly/12RY6Fr). “This wireless success story is due in no small measure to the Commission’s longstanding recognition that a light touch approach to wireless regulation best promotes competition, innovation and investment."

But other carriers were pleased with Justice’s letter. “DOJ is correct -- allowing smaller carriers to access additional usable spectrum would benefit the entire competitive wireless ecosystem and consumers,” said Steve Berry, president of the Competitive Carriers Association. “DOJ should be commended for their outstanding work, and I hope the FCC carefully considers these findings as it continues to evaluate mobile spectrum holdings and craft rules for the upcoming incentive auctions."

"The Justice Department is absolutely right,” said Larry Krevor, Sprint vice president-government affairs. “Ensuring that all carriers, large and small, have access to low-band spectrum would improve competition and benefit consumers. We are hopeful that the FCC will adopt policies which recognize the importance of low-band spectrum to wireless competition and the American economy as a whole.” Free Press Research Director Derek Turner said the filing should make the FCC “sit up and take notice” that mobile competition is at stake. “While AT&T and Verizon believe that there should be no limits on the amount of spectrum they can control, our nation’s top antitrust experts strongly disagree,” Turner said. “The Justice Department is deeply concerned that shortsighted FCC spectrum allocation policies could jeopardize competition in the U.S. wireless market.”