AT&T Makes Closing Case Against Spectrum Bidding Limits in Incentive Auction
With an FCC vote on spectrum aggregation rules set for the FCC’s May 15 meeting, AT&T countered arguments by Sprint and T-Mobile that backed bidding limits (CD May 6 p3), in a Wednesday letter to the commission. Also on Wednesday, wireless competitors made their case for spectrum aggregation limits for both AT&T and Verizon (CD May 8 p1).
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"Any attempt to adopt spectrum aggregation policies that treat spectrum frequencies differently based on their propagation characteristics and deployment costs would ignore fundamental principles of economics and thus would be arbitrary,” AT&T said. “Sprint and T-Mobile’s analyses focus on one characteristic of spectrum -- propagation -- and how that characteristic affects one aspect of a provider’s costs -- its cost to deploy cell sites.” The analysis ignores the “total economic costs” of deploying a network, including the cost of spectrum licenses, AT&T said. “If some spectrum will cost more to deploy, then, all else equal, it will sell for lower prices at auction or in secondary market transactions, and the two effects will largely offset one another,” the carrier said.
Both Sprint and T-Mobile make the argument “that all providers need at least some low-frequency spectrum to provide a ‘coverage layer,’ and that the Commission should therefore create regulatory preferences to ensure that Sprint and T-Mobile have an enhanced opportunity to acquire such spectrum,” AT&T said. But T-Mobile has 700 MHz spectrum it bought from Verizon and Sprint has 800 MHz spectrum, the carrier said. “There is simply no economic basis for the Commission to structure its spectrum aggregation or auction rules to give Sprint or T-Mobile an artificial advantage in acquiring additional low-frequency spectrum."
Low-band spectrum does not offer major advantages in urban areas, AT&T said. In the case of steel-reinforced concrete buildings, “high-frequency spectrum has the advantage in penetrating such buildings because it is more likely to penetrate the windows,” the carrier said. AT&T conceded low-frequency spectrum does have an advantage in penetrating red brick and cinderblock buildings. “A real-world operator would typically address in-building penetration issues with in-building and small cell deployments … not the far more expensive approach of tripling the number of macrocell sites,” AT&T said.
AT&T criticized a T-Mobile study on the advantages of low-band spectrum. “The only thing the analysis purports to show is that, in theory, a provider could build a coverage-driven, 700 MHz-only network in Dallas with fewer cell sites than T-Mobile’s existing AWS network,” AT&T said, charging that the T-Mobile analysis is also flawed. “T-Mobile is focusing on only one characteristic of the spectrum, propagation, and ignoring that any propagation-related differences in deployment costs will be offset by lower prices for the spectrum itself,” AT&T said. “T-Mobile is also ignoring the fact that deployment in urban/suburban areas like Dallas is driven today by capacity, not coverage, and in such environments cell sizes must be small to achieve the necessary quality of service and throughput, thus negating the theoretical propagation advantages of the low-frequency spectrum.” It said high-frequency spectrum “has many important characteristics other than propagation, and many of those -- including the availability of larger contiguous blocks, reduced inter-cell interference, improved ability to take advantage of advanced antenna capabilities, and the like -- give high-frequency spectrum significant countervailing marketplace advantages.”