Rarely do you see companies double-dare the FCC to back up
their brave talk about promoting competition. That is, however, what AT&T
has just decided to do – with a little help from Verizon. After gobbling a ton
of spectrum last year in a series of
small transactions, AT&T announced earlier this week it would buy up
ATNI, which holds the last shreds of the old Alltel Spectrum. To top this off,
Verizon just announced it has selected the purchaser for the 700 MHz spectrum
it promised to sell off to get permission to buy the SpectrumCo spectrum. And
guess what? The purchaser of the bulk of Verizon’s 700 MHz licenses, which
Verizon promised to divest to promote competition – is AT&T!
Mind you, this was exactly the anti-competitive scenario
many of us predicted when Verizon made the offer to sell off its 700 MHz
licenses in order to bulk up on its AWS footprint. Nevertheless, the FCC
refused to impose a condition prohibiting the sale of the licenses to AT&T
on the grounds that it could wait to see who purchased the licenses before
acting. Well, now we know, and the FCC has the “hypothetical” transaction it
did not want to consider last summer squarely before it today.
One would think this alone would constitute a sufficient
double-dare to the FCC to see if it still means all that stuff about wireless
competition and preventing excessive spectrum competition. But it gets better.
AT&T will give Verizon a bunch of AWS licenses, enhancing its spectrum
concentration as well. In other words, not only is AT&T further
monopolizing all the spectrum below 1 GHz, but the transaction also bulks out
Verizon on AWS spectrum to levels the Commission found only last summer were
But it gets even better. You know that ATNI spectrum
AT&T is also acquiring? Not only is it primarily valuable super-yummy below
1 GHz spectrum (with a dash of AWS spectrum for flavor), it has high symbolic
value as a giant middle finger to the FCC’s use of divestiture conditions to
promote competition. When Verizon bought Alltel in 2008, the FCC and DoJ
required a bunch of divestitures. Verizon sold off most of the spectrum to – you
guessed it – AT&T. The chunk AT&T didn’t want went to ATNI. The
Commission (and the Department of Justice) allowed AT&T to buy the Alltel spectrum
from Verizon, with a tacit understanding that it would never try to acquire
the rest of the divested Alltel spectrum.
In a world where actual divestiture conditions are
considered a joke, is it any surprise that this “understanding” is regarded as
beneath contempt by AT&T? Mind you, given that Sprint and T-Mo are tied up
with transactions of their own, and ATNI is a member of the Competitive Carrier
Association (CCA), the chief potential opponents of an AT&T/ATNI deal were
effectively sidelined. So if AT&T were going to make a try for ATNI and its
spectrum, this was certainly the time.
But then AT&T and Verizon piled this latest transaction
on all of this. We have an open 700 MHz interoperability proceeding, during
which AT&T proceeds to monopolize the 700 MHz B licenses. We have an open
spectrum aggregation/spectrum screen proceeding, during which the two biggest carriers decide
to bulk each other up on their favorite spectrum, magnifying their competitive
advantage over their competitors. Furthermore, even with deals pending before the
Commission, it is damn hard for Sprint and T-Mo to just let this slide. If
nothing else, the CCA is not conflicted on this transaction, and will almost
certainly oppose (at least, if its members have any interest in surviving they
will oppose). If AT&T and Verizon were trying to rub everyone’s face in the spectrum concentration issue, they could not have done a better job.
But what astounds me is just the shear number of red lines
with the FCC that AT&T, with Verizon’s help, have managed to cross in a
single week. Really? You want to spit on every single pro-competitive spectrum
move the FCC has done in the last two years? Why? To see if they are serious?
To not just dare them, but double-dare them to follow thorough on their brave
words about promoting competition? To see if now that Gene Kimmelman has left
the DoJ, everything will be wine and roses again for the “wireless duopoly”?
In any case, we now have the acid test for the FCC and its
apparent new found commitment to wireless competition. We have seen in the last
few months how the FCC’s willingness to stop excessive spectrum concentration has brought about $25 billion in investment into the wireless marketplace, as
well as forcing AT&T to invest $14 million to upgrade its systems. If the
FCC wants to keep this flow of capital and deployment going, it needs to take
AT&T and Verizon up on its double-dare and show that “when we said we will
take steps to prevent excessive concentration of spectrum, we meant
Or the FCC can do nothing, in which case everyone will know
that the FCC was only kidding and would-be competitors will look elsewhere to
invest their money.