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Smaller carriers team up to influence terms of AT&T/T-Mobile merger

A recent filing with the Federal Communications Commission by several smaller mobile carriers points to their concerns over AT&T and Verizon Wireless? growing dominance in wireless communications.

Six mobile carriers this week submitted a joint filing to the FCC, asking the commission to consolidate into a single proceeding its review of AT&T?s proposed merger with T-Mobile and its proposed acquisition of spectrum from Qualcomm.

?We all have common interests and concerns that AT&T will increase its dominant position in acquiring spectrum below 1 gigahertz and particularly the 700 MHz spectrum, which has been designated as the high-speed mobile broadband platform in the U.S.,? said Steven K. Berry, president/CEO of the Rural Cellular Association, Washington, and one of the petitioners. ?All of the joint petitioners would like to get access to that spectrum themselves.?

The other groups filing the petition are Cincinnati Bell Wireless, MetroPCS Communications Inc., NTELOS, the Rural Telecommunications Group and Sprint Nextel.

AT&T would like to see the reviews for each deal remain separate.

"These are two completely separate proceedings and should remain so,? said Margaret Boles, a spokeswoman at AT&T, Dallas, TX.

In part, the company doesn?t want to slow down the approval process.

?The FCC has been fully briefed by all interested parties on our application to acquire spectrum from Qualcomm,? Ms. Boles said. ?We are now at day 77 of the 180-day shot clock and we urge the Commission to expeditiously grant our application."

Few alternatives for small carriers
The petitioners feel, however, that if the two deals were to go through as they stand, it would increase AT&T?s market dominance, thereby leaving smaller carriers few alternatives for national roaming partners. 

?Acquisition of the Qualcomm spectrum coupled with the additional spectrum acquisition that accompanies the T-Mobile acquisition will eliminate viable competitors in the 4G world,? Mr. Berry said.
The two deals also involve AT&T acquiring spectrum in overlapping markets.

For these reasons, the petitioners feel that each of AT&T proposed deals cannot be viewed by the FCC in a vacuum but should be considered in terms of their combined impact on spectrum availability.

Who should be able to own spectrum to support mobile services and mobile broadband spectrum is one of the big issues here.

?Spectrum is the lifeblood of the mobile industry, so more spectrum can equate to more market power,? said Mike Roberts, principal analyst and head of Americas at research firm Informa Telecoms & Media, Westborough, MA.

Because mobile networks are expensive, carriers want to get as big as possible so their investments serve as many people as possible, per Mr. Roberts. But, if there are just a few big players, then the market is not competitive and prices go up.

Spectrum analysis
The FCC?s role is to make sure spectrum is distributed in a fair and competitive way.

AT&T and Verizon currently control 92 percent of the broadband-capable 700 MHz spectrum in the top 54 U.S. markets and 100 percent of this spectrum in the top 10 U.S. markets, according to petitioners.

?It all boils down to how much spectrum each operator should own in order for the market to be as efficient and competitive as possible,? Mr. Roberts said.

The filing should not be seen strictly as an attempt to block AT&T?s moves, said Noah Elkin, principal analyst at research firm eMarketer, New York, NY.

?The move is more of an effort to influence the terms of the merger, possibly by requiring AT&T to give up spectrum in certain areas,? Mr. Elkin said.

AT&T has been selling the merger with T-Mobile on the basis that it would improve service to rural areas, per Mr. Elkin.

?If AT&T?s acquisition of T-Mobile is allowed to go forward, both Verizon and AT&T will individually be larger than all the other carriers combined ? it makes sense to approach competitive connectivity issues together,? said the Rural Cellular Association?s Mr. Berry.

Final Take
Wireless executives on spectrum crunch