FCC Should Avoid ‘Ad Hoc’ Departures from Spectrum Screen in Transactional Reviews, AT&T Says
AT&T urged the FCC to provide more certainty for carriers engaged in spectrum transactions by refraining from ordering divestitures in markets where overall spectrum holdings don’t trip the commission’s screen. “To be sure, modest steps are still needed to update the screen and restore its validity,” said AT&T Vice President Joan Marsh in a blog post Friday. Marsh didn’t elaborate on any transactions where a carrier had to give up spectrum below the screen. But in an order released Thursday on AT&T’s buy of Leap (CD March 14 p5), the FCC said explicitly that just making sure a carrier is under the cap in a given market isn’t enough.
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"In its analysis, the Commission has used an initial screen to help identify those markets that provide particular reason for further competitive analysis,” the order said (http://bit.ly/1nqdhQz). “As set out in various transactions orders, however, the Commission has not limited its consideration of potential competitive harms solely to markets identified by its initial screen, if it encounters other factors that may bear on the public interest inquiry.” The order references three other transactions in a footnote -- SoftBank/Sprint, Verizon Wireless’s buy of AWS-1 licenses from SpectrumCo and AT&T’s buy of 700 MHz licenses from Qualcomm. In the Verizon/SpectrumCo order in particular, Verizon agreed to divestitures in markets where its holdings fell below the screen (CD Aug 17/12 p1).
"Some recent decisions have departed from longstanding precedent by no longer treating the safe harbor as ’safe,’ requiring divestitures even where the screen has not been exceeded,” Marsh wrote (http://bit.ly/1lDLEiq). “These ad hoc departures from the Commission’s framework undermine the predictability that is critical to business planning. While ad hoc review of spectrum holdings in excess of the screen is both expected and appropriate, extending that process to transactions that do not trip the screen unnecessarily adds uncertainty to business planning. The Commission should make clear that its case-by-case analysis will be reserved for proposals to exceed the threshold level in any local market and that this review will be properly focused on the potential for actual foreclosure."
Marsh also repeated AT&T arguments that the spectrum screen should be expanded to include all 194 MHz of broadband radio service (BRS) and educational broadband service (EBS) spectrum. Most of the 2.5 GHz spectrum is owned by Sprint. Including this spectrum would “correct a current glaring omission,” Marsh said.
A former FCC spectrum official who does not represent carriers disagreed with Marsh’s arguments on the FCC not looking beyond spectrum covered by the screen. “The spectrum screen clearly doesn’t do things like identify whether or not someone is hoarding spectrum,” the official said. “You may be allowed 135 MHz of spectrum in a market. You may only need 15, but the spectrum screen is not triggered. ... The spectrum screen can’t be the be-all and end-all. The spectrum screen only accounts for total spectrum in a market, but not how spectrum is being used and that may be a key public interest consideration for the market.”
Former Wireless Bureau Chief Fred Campbell agreed with AT&T. “The FCC has altered its framework for evaluating spectrum aggregation in one manner or another in virtually every major transaction it has reviewed since 2010,” Campbell said. “When I teach the issue to law students these days, I mitigate their fears about bombing an exam question on the topic by explaining that there is currently no way to predict with any degree of certainty how the FCC will approach the issue in a particular case or what the benchmarks are. Recent FCC decisions have added consideration of spectrum aggregation on a national basis and spectrum aggregation below 1 GHz without specifying benchmark levels of national or sub-1 GHz aggregation that could be considered anticompetitive and eliminated the protection that was once provided by the spectrum screen’s safe harbor. As far as I can tell, the spectrum screen no longer has any real relevance to the FCC’s internal decision making process.” Campbell is executive director of the Center for Boundless Innovation in Technology.
"I'm sympathetic to AT&T’s point because one of the policy objectives of the commission should be to allow the secondary spectrum market to function more efficiently so transactions are completed in a more timely fashion,” said Randolph May, president of the Free State Foundation. “But the way the agency apparently is applying the ’screen’ lends an arbitrariness to the secondary market process that renders it problematic. This is one reason why, from an administrative law perspective, actual rules may be preferable to screens that can be applied rather arbitrarily.”