A $10 billion joint venture between Sprint and T-Mobile could be in jeopardy if the Federal Communications Commission has its way. In a notice of proposed rule-making issued late last week, the FCC said it would seek to prevent partnerships such as the one being discussed between the two wireless giants, which intend to create a joint bidding entity for next year's auction of TV spectrum.
The FCC said its proposal was part of an effort to encourage smaller companies to enter the U.S. market. It said the combined resources of two major wireless carriers could make it difficult for smaller companies to meaningfully bid for spectrum in the coming 600 MHz incentive auctions.
"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," said Roger Sherman, chief of the FCC's wireless telecommunications bureau, in a blog post.
"Therefore, the item tentatively concludes that joint bidding arrangements between nationwide providers should not be allowed," he said.
Smaller Companies Wanted
The FCC hopes to encourage smaller companies to form partnerships with larger companies to gain access to capital and competitive muscle, Sherman said.
The Competitive Carriers Association, which represents rural wireless providers, said the FCC's proposal would hamper attempts at joint bidding that might help its members, and insisted that joint bidding has worked out well in past auctions.
"Past auction experience confirms that joint bidding arrangements can enhance auction revenues and encourage participation by large and small companies alike, benefiting consumers and competition, and increasing broadband deployment throughout the United States," said the association's CEO, Steven Berry.
The reported joint venture would be run by T-Mobile, and would serve to allow it and Sprint to better compete against AT&T and Verizon, the two companies holding most of the spectrum licenses below 1 GHz. The $10 billion the companies are looking to earmark for the auction is close to the $9 billion AT&T has set aside.
The FCC has said previously that merger plans between Sprint and T-Mobile would be examined closely. Comcast, Time Warner Cable, Bright House Networks and Cox Communications won 150 licenses in an Advanced Wireless Services auction in 2006 through a merged company, SpectrumCo, formed for that purpose. It paid $2.4 billion for the licenses.
The FCC has talked about restricting the amount of spectrum that can be purchased by the top two carriers during the 600 MHz incentive auction. The commission has tried to encourage broadcasters to take part in the auction, but wireless carriers have shown the most interest in acquiring 600 MHz radio waves, which can transmit cellular signals much farther than higher-band spectrum.
The 600 MHz auction, set for next spring, is expected to raise $20 billion or more.