Bloomberg News

Airwaves Sales Sought by AT&T, Verizon Approved by Congress

February 22, 2012

(Updates in first paragraph with measure’s passage.)

Feb. 17 (Bloomberg) -- AT&T Inc. and Verizon Wireless moved a step closer to obtaining additional airwaves needed to meet surging consumer demand for smartphones as U.S. lawmakers passed a measure that authorizes sales of wireless spectrum.

The airwaves auctions are part of a broad accord reached yesterday by House and Senate members to sustain a payroll tax cut. The sales would raise at least $15 billion for the U.S. Treasury, Representative Greg Walden, an Oregon Republican, said in an interview. Both houses of Congress approved the legislation today, sending it to President Barack Obama for his expected signature.

“By freeing up airwaves to be used to build the next generation wireless networks, this package will support massive job creation and untold technological breakthroughs,” Representative Fred Upton, a Michigan Republican who heads the Energy and Commerce Committee, said in an e-mailed statement.

The auctions proposed by the Obama administration would sell rights to airwaves voluntarily surrendered by television stations. TV companies would keep a portion of the proceeds. Participating broadcasters could leave the business or transmit using other airwaves. Wireless companies would use the airwaves to support mobile phones, tablets and other devices.

‘Save Lives’

The package also would allocate $7 billion and airwaves for a nationwide network for emergency workers, said an e-mailed release from Senator Jay Rockefeller, the West Virginia Democrat who chairs the Commerce Committee. More spectrum for emergency workers was a recommendation of the 9/11 Commission that investigated the 2001 attacks in New York and Washington, when police and firefighters had trouble communicating by radio.

“This agreement will allow us to build a nationwide, interoperable communications network that is as reliable as the first responders that protect us,” Rockefeller said in an e- mailed statement. “It will quite literally save lives.”

Spending on the new network may benefit antenna-building companies American Tower Corp., Crown Castle International Corp. and SBA Communications Corp., Paul Gallant, a Washington-based analyst with Guggenheim Partners, said in a Feb. 15 note.

Airwaves sales may spur investment and job creation, the High Tech Spectrum Coalition, a group with members including Apple Inc., Alcatel-Lucent, Intel Corp. and Cisco Systems Inc., said in an e-mailed statement yesterday.

“Congress has made a great decision that will result in significant investment in mobility and will have a meaningful impact on the creation of jobs with private investment,” Rhod Shaw, executive director of the High Tech Spectrum Coalition, said in an e-mailed statement.

‘Artistic Freedom’

Broadcasters have said they’re concerned TV station owners may face added costs and lose audience if forced to switch airwaves. The legislative measure provides $1.75 billion to compensate for the costs of relocating.

“Tens of millions of Americans rely every day on local TV broadcasters for news, entertainment, sports and life-saving weather warnings,” Gordon Smith, president of the Washington- based National Association of Broadcasters, said in a statement.

“We look forward to working with Congress and the FCC to implement an incentive auction program that does not jeopardize that service,” said Smith, whose group’s members include CBS Corp., Comcast Corp.’s NBC, the Walt Disney Co.’s ABC and News Corp.’s Fox.

‘Public Rulemaking’

Language in the package may make it harder for the Federal Communications Commission to limit participation in the auctions by Verizon, the largest U.S. wireless company, and No. 2 AT&T, Jeffrey Silva, a Washington-based analyst for Medley Global Advisors LLC, said in an interview.

“They wouldn’t have the artistic freedom they’ve had before,” Silva said. “When this started the FCC had carte blanche.”

Under the proposal, the FCC can’t exclude wireless carriers as part of an auction proceeding, Jim Cicconi, AT&T’s senior executive vice president-external affairs, said in an e-mailed statement.

“It could only make such a decision through a separate public rulemaking,” Cicconi said. “This provides procedural safeguards, and also an opportunity for a court challenge.”

Cicconi on Jan. 13 said he was “troubled” that FCC Chairman Julius Genachowski wanted his agency to keep its power to set terms for the auctions.

Biggest Winners

Genachowski said yesterday the agency has sought to develop “fair, effective mechanisms for providing all carriers an opportunity to obtain spectrum.”

“Congress has recognized the vital importance of freeing up more spectrum for mobile broadband, both licensed and unlicensed, although the legislation could limit the FCC’s ability to maximize the amount and benefits of recovered spectrum,” Genachowski said in an e-mailed statement.

AT&T and Verizon were the biggest winners in the FCC’s 2008 auction of airwaves suitable for smartphone use, spending a combined $16 billion. In 2010, the companies objected after the agency restricted their ability to lease airwaves from a company that is now Philip Falcone’s proposed LightSquared Inc. wireless service.

AT&T in December abandoned a $39 billion merger with T- Mobile USA Inc. after resistance from the FCC and Justice Department, which said the combination would lessen competition. In January AT&T Chief Executive Officer Randall Stephenson in an earnings call said availability of spectrum is the “No. 1 issue for us.”

‘Job Creation’

AT&T and Verizon combined had 60.3 percent of wireless subscribers in 2010, according to data compiled by Bloomberg. Verizon Wireless is owned by Verizon Communications Inc. and Newbury, England-based Vodafone Group Plc.

Sprint Nextel Corp., the third-largest U.S. mobile carrier, said in an e-mailed statement that the legislative proposal “preserves the FCC’s ability to promote competition as it conducts future wireless spectrum auctions.”

“Sprint agrees with the Federal Communications Commission that all wireless carriers -- small, regional and large --should have a meaningful chance to participate in wireless spectrum auctions,” Vonya McCann, Sprint’s senior vice president for government affairs, said in the statement.

The auctions will help “meet Americans’ voracious appetite for mobile Internet,” Steve Largent, president of CTIA-The Wireless Association, a trade group, said in an e-mailed statement yesterday.

“Mobile data usage is expected to grow by a factor of 16 over the next five years,” Largent said. “The spectrum made available by this legislation is key to meeting that demand.”

--Editors: Michael Shepard, Timothy Franklin

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

To contact the editor responsible for this story: Michael Shepard at mshepard7@bloomberg.net


Tim Cook's Reboot
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus