FCC Looks to Halt Telecoms From Partnering in Wireless Auctions

Under the new FCC proposal, telecoms would not be allowed to "partner" with each other to bid for newly available parts of the wireless spectrum in auctions.

wireless auction

The Federal Communications Commission has floated a new proposal to block telecoms from partnering together to go after available segments of wirbeless spectrum as they arise so that competition for the limited resource is kept more equitable.

The proposal, which was launched by FCC Chairman Tom Wheeler on Aug. 1, would help to keep larger telecoms from taking over more of the wireless spectrum at the expense of smaller players, according to an Aug. 1 blog post by Robert C. Sherman, the FCC's wireless telecommunications bureau chief.

Wheeler's proposal would "open new opportunities for small and growing businesses in the mobile marketplace," wrote Sherman. "Although the proposal may sound technical—updating the Commission's approach to small business participation in wireless auctions— the purpose is simple: To provide innovative, smaller companies the opportunity to build wireless businesses that can spur additional investment and bring more choices to consumers."

A key reason for Wheeler's proposal, according to Sherman, is the ongoing trend of consolidation in the wireless industry. "We must make sure that the biggest providers are not able to limit broad participation in the spectrum auction," wrote Sherman.

The FCC is now accepting public comment on the new proposal, he wrote. "As promised in the Mobile Spectrum Holdings Report and Order, we now seek comment on whether and how we should restrict the ability of wireless companies to combine their bids during an auction."

The issue came up recently with rumors and reports about an upcoming proposed merger of Sprint and T-Mobile, and the possibility that the two companies could even try to "partner up" for wireless spectrum before a merger is even completed.

Such a scenario is not appreciated by the FCC, wrote Sherman. "Our goal is to promote the participation of as many parties as possible in the auction. If two of the largest companies are able to bid as one combined entity in the auction, their combined resources may have the effect of suppressing meaningful competition. Therefore, the item tentatively concludes that joint bidding arrangements between nationwide providers should not be allowed. It also asks questions about such arrangements between providers of different sizes."

The FCC wants to have the proposed ban on partnering in place before the next wireless spectrum auction would take place, he wrote.

Two wireless analysts told eWEEK on Aug. 4 that they think the FCC is heading in the right direction with the proposed ban on partnering.

"The telcos are consolidating, and [the FCC] is trying to keep a balance of power" between the players, said Chris Antlitz, an analyst with Technology Business Research. "The FCC is caught between a rock and a hard place. There's too much power consolidated" in the T-1's (the major players in the first level of the telecommunications industry), he said. "This is alleviating some of that power concentration."

In addition, Sprint already owns a lot of wireless spectrum from its acquisition of Clearwire back in 2005, he said. "When you add that to what Sprint already owned, in some cases it could be argued that they have more than AT&T or Verizon separately. The FCC wants to keep it balanced."

Sprint and T-Mobile could be testing the waters with the FCC in terms of wanting to partner in such an auction, said Antlitz. The two companies may think that if the FCC allowed them to do the partnered auction process, the FCC might be more likely to give its OK for any potential merger of the two, he added.

Dan Maycock, a mobile analyst with OneAccord Digital, said that if the FCC were to allow Sprint and T-Mobile to enter the auction in a partnered bidding war, major competitors Verizon Wireless and AT&T would surely complain and ask what's up.

"I think the FCC totally makes sense in what they are saying," said Maycock. At the same time, he understands the argument from Sprint and T-Mobile to partnered bidding. "It makes sense that they would want to do it, and it makes sense that the government would put the kibosh on it," he said.

The Sprint T-Mobile merger rumors heated up in June with a report in The New York Times that a deal was pending for Sprint to buy its rival for $32 billion. None of the involved companies, including T-Mobile parent company Deutsche Telekom, has confirmed or officially announced such a deal. Getting regulators—intent on protecting competition in the market—to agree to the deal won't be easy; and, should it be approved, there will still be difficulties ahead, according to an earlier eWEEK report.

Complicating the ongoing situation is a report that French telecom Iliad has made its own bid to acquire T-Mobile, even amid reports of a proposed Sprint-T-Mobile deal.