That paradox sums up a brewing fight over whether the two largest cellphone companies — ATT and Verizon Wireless — will be allowed to participate without restrictions in the planned auction of new airwaves for wireless broadband next year.

The administration’s antitrust team
urged the Federal Communications Commission in April to develop auction rules that ensure that T-Mobile US and Sprint, the two smaller nationwide mobile carriers, are able to buy some of the prime airwaves and better compete nationally with the two larger companies.

The suggestion that some auction participants could get favored treatment has spawned a dispute involving corporate lobbyists, academics and members of Congress on both sides of the debate. Some television and radio broadcasters have weighed in against auction limits while consumer advocates and some big companies that use mobile broadband in their operations have backed limits.

Whatever the F.C.C. decides will have huge implications on the ability of American consumers to inexpensively use the Internet from their smartphones, tablets and other portable devices. It could also affect how much money will be available to build a nationwide communications network for first responders, a plan that has been on the drawing board since the Sept. 11 terrorist attacks.

The newly available airwaves, also known as spectrum, will relieve some of the congestion that has plagued cellphone carriers’ networks. The airwaves being auctioned, in the 600 megahertz band, also have highly valuable characteristics, like the ability to move easily through buildings, which helps users stay connected in cities, and the ability to travel long distances between radio towers, which allows for greater coverage of rural areas.

The Justice Department and other advocates on auction limits say that if ATT and Verizon are allowed to significantly increase their holdings of that prime spectrum, T-Mobile and Sprint will be unable to continue expanding their networks. ATT and Verizon already control more than three-quarters of other, previously sold, low-frequency airwaves.

The commission “can potentially improve the competitive landscape by preventing the leading carriers from foreclosing their rivals from access to low-frequency spectrum,” William J. Baer, assistant attorney general for the department’s antitrust division, told the F.C.C. in a filing in April.

ATT responded angrily. “It is surprising that the antitrust division of the Department of Justice would even propose measures that are so nakedly designed to help specific companies,” Wayne Watts, a senior executive vice president and general counsel at ATT, wrote in filing to the F.C.C.

“The department is quite candid about its motive for this blatant favoritism,” Mr. Watts said. But, he added, “picking winners and losers in this fashion would be patently unlawful.”

Both sides claim Congressional intent is on their side. In the 2012 law authorizing the auctions, Congress said that no qualified carrier may be excluded.

Representative Fred Upton, a Michigan Republican who is chairman of the Committee on Energy and Commerce, said doing so would defeat Congress’s goals for the auction. The auctions were intended to compensate television broadcasters that are voluntarily giving up spectrum to be auctioned; to pay to relocate television stations that remain on the air; and to contribute up to $7 billion toward the construction of a nationwide public safety broadband network.

Representative Henry A. Waxman, a California Democrat who is the ranking member on the Energy and Commerce committee, says Mr. Upton misses the point. While the law “prohibits the F.C.C. from preventing a person from participating in a ‘system of competitive bidding,’ ” he said that it would be permissible for the commission to form multiple blocks of spectrum with participants being allowed to bid on some but not all of the blocks.

The F.C.C. already enforces rules limiting “spectrum aggregation.” In general, the commission’s screen prevents further acquisition once a company goes above 33 percent of the licensed airwaves in one market area. But it applies that limit on a case-by-case basis, usually when one company buys another and asks to transfer ownership of the spectrum licenses.

The costs and benefits of such limits are the subject of dueling academic studies. One, conducted through the Center for Business and Public Policy at Georgetown University’s McDonough School of Business, estimated that participation restrictions could reduce auction revenue by up to 40 percent, or $12 billion, and cost 118,000 jobs by 2017.

In another study, Jonathan B. Baker, a former F.C.C. chief economist and now a law professor at American University, wrote that spectrum caps in auctions can encourage, rather than limit, participation, that way increasing auction proceeds. His study was commissioned by T-Mobile.

The decision on which way to go will rest with the commission, which has only three members, with two spots empty. The lone Republican commissioner, Ajit Pai, said recently that the point of the auction — to maximize revenue — means “letting all the wireless players participate in the auction and letting market forces sort out who wins and who loses.”

One of the two Democrats on the panel, Mignon Clyburn, the acting chairwoman, has emphasized that spectrum limits should be intended “to facilitate access, by all providers, to valuable spectrum resources.”

That would appear to leave Commissioner Jessica Rosenworcel as the swing vote. In a statement last September, when the F.C.C. issued its requests for comments on spectrum limits, Ms. Rosenworcel called for rules that provide “opportunities for incumbents as well as new entrants,” signaling possible support for setting limits on the sale of some auction lots.

She also highlighted, however, “the larger context” of the auctions, to raise money to build the first-responder communications network. “It is imperative,” she said, “that we not lose sight of this goal.”

Article source: http://www.nytimes.com/2013/06/04/business/media/fcc-spectrum-auction-brings-fight-over-rules.html?partner=rss&emc=rss