We have previously opined that the highly touted 700 MHz auction was a win for the U.S. government (almost $20B was raised) and Google (open access rules for C block w/o spending a dime). Yet it was a big loss for public safety.
Based on a post auction spectrum analysis from a well placed source, we conclude that wireless competition is all but non-existent in the U.S. This is due to the huge swath of spectrum acquired by AT&T and Verizon Wireless and their previous acquisitions (especially AT&T’s acquisition of Aloho Partners, Dobson Communications, and RCC). As a result, AT&T and Verizon Wireless now have a choke hold on spectrum to be used for cellular telephony and broadband services (via LTE). This has numerous negative repercussions and questions whether the FCC will follow their rule on the 95 MHz Dobson threshold (explained below).
References: previous posts on this topic are at:
The FCC’s recent decision consenting to the merger of AT&T Inc. ("AT&T") and Dobson Communications Corporation ("Dobson") represents a shift in the how the FCC reviews mergers of wireless carriers, which will affect how carriers view and enter into transactions in the future. Most significantly, the FCC adopted a higher spectrum threshold to screen transactions for potential competitive harm.
Although the FCC no longer applies a cap to wireless carriers’ spectrum holdings, it does apply a screening test* to determine whether the combined spectrum holdings of merging companies could raise competitive concerns.
The FCC increased its previous spectrum screen of 70 MHz to 95 MHz or more as a result of the Dobson order in late 2007.
The new 95 MHz threshold represents approximately one-third of the 280 MHz spectrum that would be suitable for mobile telephony.
*Explanation of the FCC 95 MHz screening test/ safe harbor (as a result of Dobson order):
The FCC has from time to time implemented a spectrum screen as a threshold to scrutinize wireless carrier mergers. If a merger amongst wireless carriers causes the acquirer to have more than 95 MHz in a market, the FCC will scrutinize the transaction and possibly force a divestiture of some licenses. It is not clear whether the same standard applies to spectrum auctions, though there is no principled reason why it should matter whether you get your spectrum in a merger or an auction.
AT&T and Verizon Wireless have strenghtened their lock on wireless broadband specrtum and plan to use the newly acquired 700 MHz for LTE based services. As a result of acquisitions and 700 MHz auction wins, AT&T and Verizon Wireless now exceed the 95 MHz "Dobson Screen" in many markets. So that FCC ruling has effectively been negated. What will the FCC do now?
When a wireless carrier owns more than 95 MHz of spectrum in a given market, the FCC needs to state a reason to allow the amount over 95 MHz to be owned. So will they honor their own rule? And what would be the reason to allow the carrier to own in excess of 95 MHz? Note that Frontline Wireless (now out of business) filed numerous briefs at the FCC on this topic.
From our esteemed anonymous source: "Because outside the FCC safe harbor (spectrum in excess of 95 MHz) the FCC would need to waive its rules to grant these licenses…and what reason would they give?"
The ball is now in the FCC’s court. Will they take action or punt?
U.S. Cellular Spectrum Breakdown in U.S. following Post 700 MHz Auction:
The following is from our esteemed anonymous source, who has analyzed the licensed spectrum in the U.S. post the recently completed FCC 700 MHz auction:
Here is the breakdown of US cellular spectrum AFTER the 700 MHz auction:
AT&T or Verizon Wireless exceeds the 95 MHz Dobson threshold in 8 of the top 10 US markets, 17 of the top 25 markets, and 38 of the top 100 markets.
Each of those wireless companies separately exceeds the threshold in 5 of the top 10 markets, 10 of the top 25 markets, and in one out of five of the top 100 markets.
TOP 100 MARKETS WHERE AT&T or VERIZON WIRELESS EXCEEDS THE DOBSON 95 MHZ THRESHOLD:
- New York, NY (VZ: 119 MHz)
- Chicago, IL (VZ: 101 MHz)
- Philadelphia, PA (VZ: 99 MHz)
- Boston-Lowell-Brockton-Lawrence-Haverhill, MA-NH (AT&T: 99 MHz, VZ: 97 MHz)
- San Francisco-Oakland, CA (AT&T: 97 MHz)
- Washington, DC-MD-VA (AT&T: 99 MHz, VZ: 109 MHz)
- Dallas-Forth Worth, TX (AT&T: 124 MHz)
- Houston, TX (AT&T: 99 MHz)
- Miami-Fort Lauderdale-Hollywood, FL (VZ: 96 MHz)
- Baltimore, MD (AT&T: 99 MHz, VZ: 109 MHz)
- Minneapolis-St. Paul, MN-WI (VZ: 99 MHz)
- Atlanta, GA (AT&T: 99 MHz)
- Denver-Boulder, CO (AT&T: 99 MHz)
- Tampa-St. Petersburg, FL (AT&T: 99 MHz)
- Cincinnati, OH-KY-IN (VZ: 111 MHz)
- Kansas City, MO-KS (VZ: 114 MHz)
- Buffalo, NY (AT&T: 119 MHz)
- San Jose, CA (AT&T: 97 MHz)
- Hartford-New Britain-Bristol, CT (AT&T: 109 MHz)
- Bridgeport-Stamford-Norwalk-Danbury, CT (VZ: 119 MHz)
- Toledo, OH-MI (VZ: 104 MHz)
- New Haven-West Haven-Waterbury-Meriden, CT (VZ: 99 MHz)
- Syracuse, NY (AT&T: 101 MHz)
- Gary-Hammond-East Chicago, IN (AT&T: 99 MHz)
- Northeast Pennsylvania, PA (VZ: 104 MHz)
- Tulsa, OK (AT&T: 99 MHz)
- Allentown-Bethlehem-Easton, PA-NJ (VZ: 99 MHz)
- New Brunswick-Perth Amboy-Sayreville, NJ (VZ: 119 MHz)
- Springfield-Chicopee-Holyoke, MA (VZ: 99 MHz)
- Youngstown-Warren, OH (AT&T: 117 MHz)
- Wilmington, DE-NJ-MD (VZ: 99 MHz)
- Long Branch-Asbury Park, NJ (VZ: 119 MHz)
- Raleigh-Durham, NC (VZ: 99 MHz)
- West Palm Beach-Boca Raton, FL (VZ: 96 MHz)
- Fresno, CA (AT&T: 115 MHz)
- Austin, TX (AT&T: 104 MHz)
- Wichita, KS (AT&T: 97 MHz)
- Las Vegas, NV (AT&T: 99 MHz)
Questions to Ponder in light of AT&T and VZ Wireless Spectrum Grab
With the two giant wireless companies opting for LTE as a 4G technology, where does that leave Mobile WiMAX (Sprint, Clearwire), which will not have roaming or interoperability with the 2 U.S. carriers which have the most spectrum ?
Where are the new carriers that were supposed to emerge, e.g. Frontline Wireless?
Will there be any competition left for rural markets, which are currently underserved?
Will one or more companies build a heterogeneous network for public safety (aftter the D Block auction failure)?
Addendum: Subsequently published articles on this topic:
1. How much spectrum do AT&T and Verizon have?
"According to analysis from Alan Weissberger with DCT Advisors, AT&T or Verizon exceeds the 95 megahertz threshold in eight of the top 10 U.S. markets, 17 of the top 25 markets and 38 of the top 100 markets. See his chart of these markets here. In the Dallas-Fort Worth market, for instance, AT&T now holds 124 megahertz of spectrum."
2. SPECTRUM HANGOVER-
Carriers’ binge on spectrum assets bring competitive concerns
The author interviewed me but was skeptical about the spectrum exceeding the 95MHz Dobson screen, which does not count AWS spectrum. It is not known whether the numbers in my table include or exclude AWS.