Bloomberg News

Sprint Seeks Early U.S. Airwaves Auction as Rivals Urge Delays

September 04, 2013

Sprint Seeks Early U.S. Airwaves Auction as Rivals Urge Delays

Sprint Corp., based in Overland Park, Kansas, was bought by Tokyo-based SoftBank Corp. in July for $21.6 billion. Photographer: David Paul Morris/Bloomberg

Sprint Corp. (S:US) is pushing regulators to quickly auction airwaves for high-speed mobile data, a move rivals say may leave the third-largest U.S. wireless carrier as the sole bidder.

Sprint told the Federal Communications Commission in August that it supports a January auction of frequencies, known as the H Block, which abut its existing airwaves and can improve its high-speed wireless broadband service.

T-Mobile US Inc. (TMUS:US) and Dish Network Corp. (DISH:US) urged the FCC to consider waiting until later in 2014, when additional frequencies can attract more bidders and money. The FCC asked for comments as it prepares the biggest sale of commercially useful frequencies since 2008 -- the year after Apple Inc. introduced the iPhone and helped ignite a surge in demand for wireless data.

“It gives everybody more flexibility in their bidding strategies, which likely leads to a higher price,” said Tim Farrar, an analyst at research firm TMF Associates Inc. in Menlo Park, California, in an interview.

The H Block could raise $1 billion if auctioned alone, compared with $1.5 billion to $2 billion if offered along with other frequencies, Farrar said.

In a January auction, “It is possible that only one bidder will participate,” T-Mobile, the fourth-largest U.S. mobile provider, told the FCC in an August filing.

Carriers like buying adjacent frequencies because that makes it possible to deploy a single channel covering both swaths. Handsets then can operate at higher peak speeds.

Auction Proceeds

Sprint, based in Overland Park, Kansas, was bought by Tokyo-based SoftBank in July for $21.6 billion. SoftBank’s takeover included a $5 billion cash infusion, giving Sprint money to bolster its network and pursue acquisitions.

There’s no evidence that delaying the H Block auction would increase the government’s revenue, and any number of competitors with frequencies near that swath might bid, Lawrence Krevor, vice president of government affairs for Sprint, said in an interview.

“It’s expansion spectrum near the airwaves used by all the major players,” including largest carriers Verizon Wireless and AT&T Inc. (T:US), Dish and regional carriers, Krevor said.

Companies don’t need to say whether they will participate in an auction until a date and filing deadlines are set.

Mandate to Sell

Congress last year mandated the sale of the H Block and the other frequencies for commercial use by February 2015 as a way to address wireless demand and raise money for a nationwide communications network for emergency workers.

Lawmakers identified most of the airwaves to be sold and told regulators to identify one more swath for auction. It hasn’t been chosen, adding uncertainty to plans to offer frequencies alongside the H Block.

The stakes are high for the multibillion dollar auctions, which can leave winners flush with frequencies to feed smartphones and losers barraged with complaints of slow apps and Web pages.

While the FCC’s staff is ready to hold the H Block auction in January, a date hasn’t been set, and the agency’s politically appointed commissioners are divided over the details, as are companies.

Democrat Jessica Rosenworcel advocated a bundled auction to raise more money in a May speech. Republican Ajit Pai in June said the auction should be held by early 2014 to meet customer demand. Acting Chairwoman Mignon Clyburn, a Democrat, said in August the agency is “moving expeditiously” and didn’t specify a timetable. Clyburn declined to elaborate, Justin Cole, an agency spokesman, said in an e-mail.

A Tepid Response

Dish, the satellite-TV service that says it wants to move into the mobile business, probably won’t “meaningfully participate” in an H Block auction, the Englewood, Colorado-based company said in FCC filings. Proposals to offer the airwaves later along with other blocks merit consideration, the company said.

T-Mobile is “less likely” to participate in an H Block auction because it is more interested in another band, called the AWS-3, the Bellevue, Washington company told the FCC in its filing. “However, if the auctions were combined, T-Mobile could readily participate in bidding for both the H Block and AWS-3 spectrum.”

Tim O’Regan, a T-Mobile spokesman, declined to comment.

Major Players

The H Block comprises 10 megahertz of spectrum, a fraction of President Barack Obama’s target of 500 megahertz for commercial mobile data. Congress has told the FCC to auction an additional 55 megahertz next year, for a total of 65 megahertz. The FCC estimated that the largest auction planned, of airwaves relinquished by TV stations, would free up 120 megahertz.

The TV-airwaves auction may raise $15.2 billion as it sells off frequencies surrendered by stations in return for a cut of the proceeds. That event, which also may be held next year, is designed to turn over to mobile providers their largest chunk of airwaves since an auction in 2008 that raised $19.6 billion, with AT&T and Verizon offering the largest winning bids.

Together the auctions add up to a puzzle preoccupying lobbyists, lawyers and engineers. Leading carrier Verizon, based in Basking Ridge, New Jersey, and No. 2 Dallas-based AT&T are working to make sure they aren’t restricted in bidding. All four major carriers including Sprint and T-Mobile are assessing which frequencies fit their needs, in what parts of the U.S., and at what cost.

It would be unusual for only one bidder to appear when a patch of airwaves is offered for auction, Coleman Bazelon, a Washington-based economist and principal at the Brattle Group consulting firm, said in an interview.

“People will show up and not let bargains get away,” Bazelon said.

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

To contact the editors responsible for this story: Allan Holmes at aholmes25@bloomberg.net; Bernard Kohn at bkohn2@bloomberg.net


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Companies Mentioned

  • S
    (Sprint Corp)
    • $6.85 USD
    • 0.16
    • 2.34%
  • TMUS
    (T-Mobile US Inc)
    • $30.48 USD
    • 0.05
    • 0.16%
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