AT&T, Verizon will nuke rivals in next US mobile auction – and it's the FCC's fault, says Legere

The CEO of T-Mobile US has called the sell-off of Uncle Sam's radio space to mobile networks "a success for the US Treasury [but] a disaster for American wireless consumers."

In a scathing blog post, John Legere calls the $42bn raised by the FCC-run auction "insane," and complained that the two biggest wireless companies – AT&T and Verizon – were able to corner the market on available spectrum.

Combined with Dish, which controversially bid through three shell companies in an effort to claim back $3bn in small business credits, the top three companies grabbed "a ridiculous 94 percent of the spectrum," says Legere.

But it's not this spectrum auction that Legere is most worried about – it's the one planned for next year that will cover the extremely useful 600MHz band of frequencies that may be crucial to the future expansion of cell phone services.

The most recent auction was for mid-band spectrum, which Legere says is "ideal for data" but the next one for low-band spectrum "covers more distance and gets those signals deeper into your home and office. It gives a wireless network reach."

Next time

If the same auction rules apply, AT&T and Verizon could to use their dominant position and deep pockets to out-bid competitors a second time, and that is bad for consumers, Legere argues.

"AT&T and Verizon already control 73 per cent of the nation’s low-band spectrum," he thundered. "And they now have two-thirds of the nation’s wireless customers, and nearly $162 billion in annual wireless revenue between them."

He reckons T-Mobile US has been challenging that market dominance, which is true. In the past year, T-Mob has introduced stuff like: not requiring people to be on contract; offering to pay its competitors' excessive get-out fees to sign up new customers; allowing data plan rollover; and offering a greater range of data and voice plans. These are all aimed at tackling – and highlighting – the most disliked policies of AT&T and Verizon.

Legere says T-Mobile US will need some of the spectrum from the auction next year to expand and remain competitive. And under the current rules, he expects to be outbid.

He isn't the only person to have made these points. Industry watcher and commentator Harold Feld made the exact same point just days after the auction. Although the small-biz credit claims by Dish was abusive, Feld said its purpose was to introduce competition into the market.

In his post, Feld complained of "the continued dominance of AT&T and Verizon and their ability to foreclose any potential competitor from getting needed spectrum."

Look forward to next year's auction, Feld wrote: "We have one more major auction on the horizon, the Incentive Auction of broadcast spectrum in 2016. If we want wireless competition, we need to make it possible for competing carriers to win without looking for loopholes."

So what the solution?

Legere has a three-point solution to the issue of auction rules biased in favor of the largest companies.

1. Don't delay the auction. Apparently both AT&T and Verizon are arguing that the next auction needs to be set back. Legere fears the only reason for this is so the companies can build huge war chests and so outbid all competitors and so corner the market a second time.
2. Reserve half the spectrum for competition. Keeping 40MHz of the 80 available for companies other than the giants would "level the playing field to sustain a competitive market."
3. Change the rules. So the spectrum has to actually be used. Dish bought a huge stockpile of spectrum in the last auctions but has no clear plans to actually use it. Legere argues spectrum should be "used to provide service to consumers rather than allowing it to be collected and traded like financial securities."

And the way to get those changes in place, lies in We The People, says Legere. "You should let Congress and the FCC know that you demand a competitive, innovative future for US wireless. Go here for an easy way to write them. And, because I believe social media is a powerful way to speak out, I also encourage you tweet @FCC and tell them you stand for more competition in the wireless space."

Of course, Legere could have chosen a better time to ask consumers to hound the FCC. At the moment the regulator is somewhat overwhelmed with the net neutrality issue, with rules due to be decided next week. ®