Will FCC Relieve AT&T This Time?

Rajesh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

AT&T (NYSE: T), the second largest wireless operator in the US, has been putting in efforts to enhance its spectrum holding for quite some time. After suffering from the failed acquisition of T-Mobile and witnessing the approval of chief rival Verizon Wireless’ (NYSE: VZ)$3.9 billion deal, the carrier learnt two things. First, the FCC isn’t fond of big deals, as it calls for additional scrutiny and heavy opposition from other companies. Second, in case the transaction is big, act smart like Verizon did. So how is AT&T going to do that?  By pooling spectrum through smaller deals.

In August, AT&T purchased NextWave Wireless with the intension of using its unused airwaves, including the 20 MHz portion of the WCS band, to build its 4G LTE coverage across the nation. If the FCC gives a go-ahead signal to the carrier, it will give the telecom giant access to spectrum from the 2.3 GHz Wireless Communications Services band. Chairman Julius Genachowski circulated the order to fellow FCC commissioners to approve the proposal and allow the carrier to use the spectrum band, which was earlier preserved for satellite radio, for expanding its 4G coverage. The regulator is scheduled to vote on this matter at a meeting on October 17.

However, the proposal is facing opposition from other smaller organizations that want the agency to block the transaction.

Raising concerns again
The FCC might be getting ready to shower its blessings on the deal, but many others seem unhappy. They believe that this is another attempt by AT&T to amass enough spectrum that it'll be able to monopolize the market. The Competitive Carrier Association (CCA) that represents smaller US carriers wants the FCC to scrutinize the deal closelystating that approving the deal would be a fatal move which will not only threaten competition, but would also reduce consumer selection. However, AT&T countered it saying that the FCC should deal with transactions individually as they "are independent of one another and involve different parties and different geographic areas." Individually, the license acquisition might look pretty small; but if these small transactions are all consolidated it would account for a massive addition to AT&T's existing spectrum holdings. 

There are a number of small deals that AT&T is intending to push through. The first one is the 2.3 GHz WCS spectrum from NextWave Wireless, Comcast and Horizon Wi-Com. The next set of spectrum band the company is eyeing is the 700 MHz range license from 700 MHz L.L.C., Cavalier Wireless, David L. Miller, Farmers Telephone Company, Comsouth Cellular, Ponderosa Telephone Co., CenturyTel Broadband Wireless and McBride Spectrum Partners. And finally AT&T has set its eyes on the AWS spectrum from CenturyTel Broadband Wireless and Cavalier Wireless.

Final thoughts
Althoug the FCC chariman's approval carries a lot of authority, Genachowski’s consent on the deal isn’t final word on the matter. The FCC appears to be putting in all that it can to introduce more spectrum in the market, which is getting congested with rising data consumption. One example of this was when it approved Verizon’s SpectrumCo deal that had drawn anti-competitive concerns. The approval of the deal faces continued criticism, yet that doesn’t seem to deter the regulator from preparing to allow AT&T’s deal. Certainly the FCC has realized that its incentive auction is not going to offer immediate relief to these thirsty carriers. And so the agency is leaving no stone unturned to pump in more spectrum. It will be interesting to see how things turn out for AT&T.

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