05.18.2015Policy

Another thing to #neversettle for: rigged spectrum auctions

By: Kathleen Grillo

If ever there was an example to confirm the old adage about taking a mile after gaining an inch, we’re seeing it in the incentive auction. T-Mobile, Sprint and DISH are large, spectrum-rich companies that have already received a spectrum set-aside from the FCC in the incentive auction. Now they are agitating for an even bigger one. Policymakers should see this spectrum grab for what it is: a case of greed masquerading as need.

Here’s the backstory. To avoid having to compete for low-band spectrum in the incentive auction, T-Mobile, Sprint and DISH asked the FCC to set aside as many as three spectrum licenses (30 MHz) in every market. Verizon and AT&T are barred from bidding on those licenses, allowing T-Mobile, Sprint and DISH to win spectrum at below-market prices. This special treatment not only robs taxpayers who won’t get paid what the spectrum is actually worth, but also harms consumers by limiting the amount of spectrum they can access for mobile broadband.

T-Mobile, Sprint and DISH may play the sympathy card at the FCC, but they are multibillion dollar corporations capable of bringing serious money to the auction table and bidding for spectrum on the same terms as everyone else. T-Mobile and Sprint are owned by large multinational corporations (Deutsche Telekom and Softbank, respectively). In terms of spectrum holdings, Sprint owns more spectrum than any other carrier by far, holding nearly twice as much as Verizon. T-Mobile has more mid-band spectrum than either Verizon or AT&T. And thanks to a sale by Verizon, T-Mobile also has the low-band spectrum it claims it needs for its mobile broadband services.

Then there’s DISH:

DISH made headlines and raised eyebrows in Congress and at the FCC for its actions in the recent AWS-3 spectrum auction. According to media reports and FCC filings (including one by Verizon) DISH and two other companies may have violated rules intended to help small business acquire spectrum via coordinated bidding and the discouragement of other, legitimate competitors from bidding. By gaming the process, DISH is claiming a $3.3 billion discount, money that wouldn’t go toward reducing our national debt. Just as important, it got valuable spectrum that might have been deployed by smaller companies for consumer broadband service, but will now no doubt be stored in DISH’s warehouse.

Which brings us to today. Having been given their inch, T-Mobile, Sprint and DISH are going for the extra mile by mounting a slick PR campaign to get the FCC to set aside even more spectrum for the incentive auction. If they get their way, half of the available 600 MHz spectrum would be set aside for them at discounted prices.

These companies would have us believe that the goal of the incentive auction is to give them valuable spectrum no one else can bid on so they can be more “competitive” against Verizon and AT&T. The true goal of the incentive auction is to free up more spectrum to meet consumers’ growing demand for mobile broadband by paying TV broadcasters for their spectrum and selling it to the wireless industry. But more restrictions on competitive bidding will leave the FCC with less money to buy back spectrum from broadcasters and less spectrum for consumers.

T-Mobile, Sprint and DISH have received more than their fair share of regulatory advantages at the expense of taxpayers. Spectrum is too valuable a public resource to consumers and the U.S. economy for the FCC to set aside large amounts for select companies at cut-rate prices. The FCC should instead hold an open and competitive auction that will put spectrum in the hands of any company willing to pay market value and use it to meet America’s explosive demand for mobile broadband.

About the author(s): 

Kathleen (Kathy) Grillo is senior vice president and deputy general counsel, public policy and government affairs, with responsibility for Verizon's public policy, federal and state legislative and regulatory affairs, antitrust and privacy, and strategic alliances. Kathy has been with Verizon since 2002 and has served in various roles in the legal and public policy organizations, including representing Verizon at the Federal Communication Commission.

Before joining Verizon, she was in private practice at Williams & Connolly LLP in Washington, D.C. She attended the University of Virginia and the University of Virginia law school.

Kathy lives in Arlington, Virginia, although she proudly remains loyal to her hometown New York Yankees.