Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Justice Department reiterates support for ensuring more wireless carriers can get low-band spectrum, (May 15, 2014)

By Paul Kirby,TRDaily

The Department of Justice yesterday said it stands by an April 2013 filing that urged the Federal Communications Commission (FCC) to consider imposing spectrum caps, weights, or other measures to ensure that smaller wireless carriers are able to get access to spectrum—particularly frequencies below 1 gigahertz (1GHz). The letter from William J. Baer, Assistant Attorney General in charge of the Antitrust Division, came on the eve of the FCC’s vote on incentive auction and spectrum holdings orders and was likely designed to bolster the agency’s plan to adopt bidding limits on carriers with larger amounts of spectrum below 1 gigahertz.

Today, the FCC announced that it adopted a Report and Order revising rules for its mobile spectrum holding policies. With respect to transactions involving low-band (below 1 GHz) spectrum, the FCC will continue to use a case-by-case review of these transactions. Aggregation of approximately 1/3 or more of available low-band spectrum will be an “enhanced factor” in the competitive analysis of a proposed transaction, it was noted.

In his letter, Baer said: “I write today to confirm that the Department stands by the views articulated in those April 2013 comments, and that no intervening developments in the industry have affected the compelling economic rationale for well-defined, competition-focused rules concerning acquisitions by the most spectrum-rich providers.”

“As the comments explained, without clear and meaningful rules, spectrum auctions may lead to inefficient and anticompetitive allocations of our nation’s spectrum resources,” the letter added. “Our prior comments described at length the economic theory underlying a concern that the ‘foreclosure value’ of spectrum may cause harm to competition and consumers. Spectrum auction rules are a neutral means of ensuring auction participants are unable to implement such anticompetitive strategies. A foreclosure strategy is not merely theoretical—specific facts about the wireless industry, such as high market concentration, high margins, and scarce critical inputs, make anticompetitive foreclosure more likely. Therefore, the Department believes it is essential to maintain vigilance against any lessening of the intensity of competitive forces, or reduction in the number of effective competitors, in the wireless industry.”

“In particular, low-frequency spectrum remains a competitively critical input,” Baer added. “Low-frequency spectrum also remains especially scarce. As many commenters have noted, and as the Department’s own comments acknowledged, for some purposes, such as expanding capacity in dense urban areas, high-frequency spectrum can be just as suitable as low-frequency spectrum. However, some aspects of wireless coverage and quality, such as strong rural or in-building coverage, simply cannot be provided as cost-effectively without low-frequency spectrum. If the largest providers are able to use a foreclosure strategy, they will be able to exercise a degree of market power, at least in certain areas, due to their networks’ superior coverage characteristics.”

He also noted in his filing that “[t]he Communications Act specifically requires that in designing auction policies, the Commission promote competition ‘by avoiding excessive concentration of licenses.’”

As circulated, the draft spectrum holdings order would reserve up to 30 megahertz of spectrum in each market for carriers that have less than one-third of sub-1 GHz band spectrum in that market.

News: Antitrust AntitrustDivisionNews