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Sprint to skip spectrum auction in possible blow to wireless competition

Tuesday, Sep 29, 2015

Sprint has decided to skip a major auction of low-band spectrum in a move that could save the company billions of dollars but make it harder to compete against cellular market leaders Verizon Wireless and AT&T.

Sprint has more spectrum than the other major nationwide carriers, but not as much of the so-called "beachfront spectrum" in low-frequency bands, which is better for covering long distances and penetrating building walls. A Federal Communications Commission auction scheduled for early next year will shift a large portion of those desirable airwaves in the 600MHz range from TV broadcasters to wireless carriers.

Sprint will not bid on the airwaves, however. Sprint CEO Marcelo Claure said in a statement issued Saturday that the company already "has the spectrum it needs to deploy its network architecture of the future.”

"Sprint has started a major effort to increase coverage and capacity by densifying its network and increasing the number of cell sites using its existing spectrum," the company also said. "Sprint is already deploying new technologies, such as carrier aggregation, that unlock the potential of its strong 2.5 GHz spectrum position."

Sprint has consistently finished behind Verizon and AT&T in network quality rankings. But the company is "under pressure to cut costs because of investor concerns it was spending too much to acquire and retain customers and build out its wireless network," a Reuters article said last week.

Sprint owner SoftBank hoped to boost its market share by acquiring T-Mobile US last year but abandoned the deal because US regulators don't want the wireless market to drop from four major nationwide carriers to three.

The FCC and T-Mobile both say next year's auction will be important for boosting competition. AT&T and Verizon control 73 percent of the country's low-band spectrum, and this auction could be the best chance for smaller carriers to get low-band airwaves "for decades to come," T-Mobile CEO John Legere has written.

The auction is expected to raise tens of billions of dollars. To prevent the big two carriers from dominating, the FCC is reserving up to 30MHz in each geographic area for carriers that don't have significant amounts of low-band spectrum in the region. AT&T and Verizon objected to the limits, while T-Mobile argued that the reserve should be bigger.

Though it could have acquired airwaves at a discount because of the FCC's reserve, Sprint "hasn’t turned an annual profit since 2007, and it burned through $2.2 billion in cash in the latest quarter," The Wall Street Journal noted. Sprint told the Journal that it is "prioritizing its financial resources" with its existing spectrum in part because deployment of new spectrum "won’t benefit our subscribers until 2020 at the earliest.”

The FCC isn't surprised by Sprint's decision to sit out the auction given its recent public statements about focusing on deploying spectrum they already have, and the fact that Sprint has skipped other major auctions in the last few years, an FCC official told Ars. But the FCC is encouraged by expected bids from the other three major carriers as well as rural carriers, the official said.

There could also be more "non-traditional bidders" from industries outside the cellular business, the official said. Dish Network, the satellite TV company, has been building up spectrum holdings, and there have been reports that cable companies might want to get into wireless.

Claure argued last week that Sprint could be "a stronger and more formidable competitor" if it merged with a cable company but said there are no current merger talks, according to Reuters.

In its statement on dropping out of the auction, Sprint urged the FCC to take other steps to boost competition. Sprint and T-Mobile purchase bandwidth from bigger carriers AT&T and Verizon in what's known as the "special access" market. Special access prices indirectly affect what smartphone customers pay for service, and Sprint asked the FCC to more strictly regulate the "pricing, terms, and conditions."

 

arstechnica.com

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