AT&T Says It May Avoid Airwaves Auction On Restrictions

AT&T Inc., the second-largest U.S. wireless carrier, said U.S. rules may prompt it to sit out a spectrum auction designed to raise money for television-station owners and harvest airwaves for smartphones.

Restrictions proposed by the Federal Communications Commission “are complicated and unnecessary” and would favor other companies, Joan Marsh, AT&T’s vice president for federal regulations, said in a filing at the agency today. AT&T would be restricted from bidding in markets covering more than 70 percent of the U.S. population, Marsh said.

FCC Chairman Tom Wheeler may ask the agency to vote next month on his proposal for the 2015 auction. Since the auction depends on broadcasters making airwaves available for bidding, some TV executives “might have second thoughts” without AT&T’s money coming into the process, said Paul Gallant, a Washington-based managing director for Guggenheim Securities.

“My guess is they ultimately will participate, but this threat has to catch the FCC’s eye,” he said in an interview.

TV stations are voluntarily giving up some airwaves as the FCC seeks to devote more frequencies to the growing number of smartphones and wireless devices that use networks run by carriers including market leader Verizon Communications Inc., and AT&T.

‘Untenable Position’

Under Wheeler’s proposal, the FCC could reserve airwaves in some markets for carriers that own less than one-third of that area’s frequencies most favorable for smartphone use, said two people briefed on the chairman’s proposal who asked not to be identified because the plan hasn’t been made public.

Some airwaves would be open to all bidders in every market, the people said. The limitations wouldn’t begin until auction activity passes a threshold yet to be set, such as money raised or airwaves cleared, they said.

The restrictions “would put AT&T in an untenable position, forcing AT&T to reevaluate its potential participation in the auction,” Marsh wrote.

“If AT&T pulls out, that would sink the whole auction,” Roger Entner, an analyst with Recon Analytics in Dedham, Massachusetts, said in an interview. “It would mean there’d be no one to bid against Verizon. And without a counterbidder, Verizon would spend a lot less.”

Ed McFadden, a Washington-based spokesman for Verizon, owner of Verizon Wireless, declined to comment.

Competitive Auction

The filing “rings hollow” and is “simply more of the same” from AT&T, said Steven Berry, president of the Competitive Carriers Association, said in an e-mailed statement. Members of the Washington-based trade group include the third-largest U.S. wireless carrier, Sprint Corp., and No. 4 T-Mobile US Inc., which have supported bidding restrictions.

“The FCC is trying to create a pro-competitive auction that gives every carrier an opportunity,” Berry said in an e-mailed statement.

AT&T and Verizon own almost 80 percent of the U.S. airwaves most favorable for smartphones, Berry said.

Randall Stephenson, chairman and chief executive officer of Dallas-based AT&T, told investors March 6 that “we’re going to need -- the industry is going to need another round of spectrum.”

“The big auction that the industry is paying a lot of attention to, is the broadcast spectrum that’s expected to come to market in 2015,” Stephenson said. “And this one is no layup in terms of execution for anybody.”