WTB Denies Reconsideration of T-Mobile/Channel 51 Spectrum Manager Lease Agreements

On December 3, 2020, the Wireless Telecommunications Bureau (“the Bureau”) released an Order denying Verizon’s Petition for Reconsideration of the Bureaus acceptance of T-Mobile License LLC’s (“T-Mobile”) Spectrum Manager Lease Agreements (“the agreements”) with Channel 51 License Company LLC (“Channel 51”) and LB License Co. (“LB License”), LLC and dismissing requests by AT&T and T-Mobile to revise the FCC’s spectrum screen in the application proceeding.  As discussed in depth below, the Bureau concluded that the spectrum manager leasing agreements would serve the public interest, would not result in a substantial likelihood of competitive harm, especially considering the significant increase in spectrum that has recently been made available, and that revising the Bureau’s mobile spectrum holding policies was outside the scope of the instant proceeding.

 

Background:  On March 24, 2020, Channel 51 and LB License filed applications with the FCC, notifying the FCC that they had entered into a long-term spectrum manager lease agreements with T-Mobile, which expire on February 28, 2023.  The Bureau reviewed the applications, performed a competitive analysis, including enhanced factor review, of the leased spectrum, and concluded that the lease notifications should be accepted.  The Bureau accepted the notifications on July 9, 2020.  On August 7, 2020, Verizon filed a petition requesting reconsideration of the Bureau’s acceptance of the applications, requesting that the Bureau conduct a searching inquiry into the competitive consequences of the agreements and, if there are competitive harms, reject the applications or require spectrum divestitures.

 

Verizon’s Petition for Reconsideration:  The Bureau concluded that Verizon’s Petition for Reconsideration must be denied because the likelihood of competitive harm resulting form the leasing agreements is low, the agreements are likely to serve the public interest, and the potential public interest outweighs any potential public interest harms.

 

  • Standard for Analysis:  In considering applications involving a proposed transaction, the Bureau considers the potential public interest harms (including potential competitive harms) as well as whether the proposed transaction is likely to generate verifiable, transaction-specific public interest benefits.  The Bureau applies a sliding scale approach, which requires applicants to demonstrate a higher magnitude and degree of any potential benefits in circumstances where the potential harms are both likely and substantial.  As a part of its competitive analysis, the Bureau employs an initial spectrum screen and case-by-case review to evaluate the likely competitive effects resulting from increased spectrum aggregation through secondary market transactions.  Any increase in spectrum holdings below 1 GHz is treated as an “enhanced factor” for case-by-case review if, post-transaction, the acquiring entity would hold 1/3 or more of the available spectrum below 1GHz.

 

  • Market Definitions, Input Market for Spectrum, and Market Participants:  The Bureau concluded that the relevant product market for the applications is a combined “mobile telephony/broadband services” product market comprised of mobile voice and data services, including those services provided over advanced broadband wireless networks.  The Bureau further concluded that, at the time of filing, the total amount of available spectrum for these services was 715.5 megahertz, with an associated spectrum screen trigger of 240 megahertz.  After filing, the spectrum screen trigger was increased to 250 megahertz; however, the Bureau notes that, even under the increased screen trigger, their analysis remains the same.  Finally, the Bureau concluded that the applicants were market participants.

 

  • Competitive Analysis:  Pursuant to these agreements, T-Mobile would lease 10 to 30 megahertz of 600 MHz spectrum in 204 counties in all parts of 64 cellular market areas (“CMAs”), covering roughly 32% of the United States’ population.  Post-transaction, T-Mobile would be attributed a maximum of 362.5 megahertz of spectrum in the CMAs, including a maximum of 75 megahertz of below 1 GHz spectrum, thus triggering enhanced factor review.  Overall, the Bureau concluded that the leasing arrangements’ potential public interest benefits outweighed any potential public interest harms.

 

  • Potential for Harm:  The Bureau concluded the Spectrum Manager Lease Agreements were unlikely to result in a potential for harm because T-Mobile’s use of the spectrum will not result in a discontinuance, reduction, loss or impairment of service and rival service providers would still be able to effectively compete in the market.
    • Use of Spectrum:  Neither Channel 51 nor LB License currently uses the spectrum in the agreements to provide services to end-user customers.  The Bureau thus concluded that T-Mobile’s use of the spectrum would not result in any discontinuance, reduction, loss, or impairment of service to end-user customers or a loss of an existing service provider in any market.
    • Competition in the Market:  The Bureau concluded that there was little potential for harm to future or existing competition as a result of the agreements.  The Bureau noted that as a result of several auctions and FCC policies, 1,023 megahertz of spectrum is or will shortly be available and more spectrum will continue to be made available as additional policies are revised.  The Bureau concluded that, given this increase in total supply of spectrum, it is unlikely that T-Mobile’s additional 10 to 30 megahertz of spectrum would foreclose entry into the market or raise rival’s costs. Further, the Bureau concluded that the existing competition in the markets was unlikely to be harmed because both Verizon and AT&T have robust coverage areas in the markets where T-Mobile will exceed the screen and several other entities hold licenses in all or some of the markets covered by the proposed leases.  Finally, the Bureau noted that the leases would expire in early 2023; thus, to the extent that the market is harmed, the Bureau would be able to re-evaluate any competitive concerns at that time.
  • Potential for Benefit:  The Bureau concluded that the agreements were likely to produce substantial public interest benefits as a result of T-Mobile’s use of currently unused spectrum and their ability to improve and expand their wireless infrastructure.
    • Use of Spectrum:  The Bureau concluded that the applications were likely to produce a benefit because the spectrum, which is currently unused, can be deployed immediately to promote T-Mobile’s buildout of its 5G network.
    • Competition in the Market:   The Bureau concluded that the applications would result in enhanced competition and consumer benefits.  Specifically, the Bureau concluded that T-Mobile would be able to launch, enhance, and expand its LTE and 5G networks, which would enhance network coverage and performance in the relevant markets.
  • Verizon and AT&T’s Direct Claims:  The Bureau concluded that neither Verizon nor AT&T had identified any specific harm that would result from the leasing agreements.  The Bureau acknowledged that while T-Mobile’s holdings are above the screen, the screen is simply a trigger that prompts additional analysis, “it is not a hard cap on a service provider’s holdings.”  Thus, without some additional harm, T-Mobile’s holdings above the screen alone are insufficient to demonstrate specific harm.   Further, the Bureau noted that Verizon’s argument that approval would make competition more difficult was unpersuasive.  Neither Verizon nor AT&T had established that the spectrum was necessary for their deployment plans or that they lacked spectrum to meet their current needs.  Additionally, the Bureau noted that its “mandate is to protect competition, not any particular competitor.”

 

AT&T and T-Mobile’s Requests to Revise the Spectrum Screen:  AT&T and T-Mobile both requested that the Bureau reconsider its spectrum screen policies and address its spectrum aggregation issues related to Auction 107.  The Bureau concluded that the instant application proceedings were not the appropriate proceeding with which to address these requests.  Instead, the Bureau suggested it should be raised through a rulemaking.  Despite being outside the scope of the proceeding, the Bureau, again, reiterated the substantial increase in spectrum that has been made available since 2014.  The Bureau also noted that it will perform a case-by-case review of the long-form applications in Auction 107 to review any anti-competitive harms.

 

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