Sprint Claims AT&T Can Boost Coverage, Increase Capacity Without T-Mobile Merger

Keep up with the latest developments and legal issues in the telecommunications and emerging technology sectors, with exclusive access to a comprehensive collection of telecommunications law news,...

AT&T Inc. can increase network capacity by more than 600 percent over the next five years and roll out higher-speed mobile broadband services to more people without acquiring T-Mobile USA, Sprint Nextel Corp. argued in a new filing with the Federal Communications Commission. Sprint contends that AT&T can achieve the same gains by upgrading existing network technologies to LTE (long-term evolution), deploying more cell sites, and developing alleged “warehoused” spectrum.

The filing came late June 20, the final day parties could formally respond to AT&T's defense of its takeover of T-Mobile.

AT&T has consistently characterized the deal as a solution to network congestion problems like those experienced by users of Apple's iPhone, a means of finally gaining the scale it needs to roll out its 4G LTE network nationwide.

But Sprint disagrees. The company argues that AT&T already occupies significant spectrum holdings, going so far as to accuse AT&T of “hoarding” spectrum. AT&T, Sprint claims, is currently the largest holder of “unused” spectrum—with an average of 40 megahertz in the AWS (Advanced Wireless Services), 700 MHz, and WCS (Wireless Communications Services) spectrum bands sitting idle or underutilized on a population-weighted nationwide basis.

“AT&T would like to throw T-Mobile's spectrum at its purported network capacity problem, but there are far more efficient means to meet the rising demand for broadband data services without creating a duopoly,” Sprint wrote in the June 20 filing. “AT&T can start by putting its unused spectrum to use by expediting its LTE deployment and taking common industry steps to accelerate subscriber migration to this far more spectrally efficient technology. AT&T can also supplement its macro cell network with a heterogeneous network topology using small cell network enhancements, such as picocells, femtocells, and WiFi hotspots.”

According to Sprint, these alternatives reflect the “latest technology for squeezing the most capacity out of a fixed amount of spectrum.”

In AT&T's most recent filing to the commission, the company detailed efforts to increase network capacity “on its own,” without a merger, such as deploying distributed antenna systems, femtocells, Wi-Fi “hotspots” and “hot zones,” and erecting more cell towers. While effective in the short term to improve coverage, these efforts are insufficient to manage future capacity constraints, the company said.

AT&T's mobile data traffic has increased by 8,000 percent over the past four years. By 2015, that traffic is expected to be eight to 10 times what it was in 2010.

With the acquisition of T-Mobile, AT&T would gain access to T-Mobile's spectrum, most notably in the Advanced Wireless Services band. In the top 100 U.S. markets, Verizon Wireless and AT&T maintain a total of 88 MHz and 84 MHz of spectrum, respectively. Verizon boasts 34 MHz in the coveted 700 MHz band while AT&T controls 18 MHz. Sprint and T-Mobile have no spectrum in the 700 MHz, but occupy 69 MHz and 51 MHz, respectively, spread out over the 850 MHz, 1900 MHz, and AWS bands.

All told, in acquiring T-Mobile, AT&T would come away occupying roughly 135 MHz of spectrum in the major U.S. markets, compared with Verizon's 88 MHz and Sprint's 69.

Sprint has made AT&T's spectrum holdings, pre- and post-merger, the centerpiece of its opposition.

In its June 20 filing, Sprint urged AT&T to use its “fallow” 700 MHz and AWS spectrum to solve capacity challenges.

AT&T: Spectrum Not ‘Fallow.'

The problem from AT&T's perspective, however, is that it is using that spectrum to build out its 4G LTE network.

“It is by definition not fallow,” Wayne Watts, AT&T's general counsel, told reporters during a lunch briefing June 21. “It is being used for the next generation of service that our customers want.”

Watts took issue with Sprint's contention that all AT&T has to do to solve its “network problem” is to build out an LTE network “faster and broader and move customers over to LTE faster.”

“The problem with that is, first and foremost, to build out that spectrum, we have to use the very spectrum they claim is lying fallow, and you cannot use that spectrum for two purposes,” Watts said. The company maintains 2G and 3G customers, and cannot “kick” its 2G customers off of that spectrum to solve future capacity constraints, Watts added.

AT&T has already made a commitment to build out its 4G LTE network to cover 97.3 percent of the country. The network is expected to launch in 16 markets later this year. The company estimates that without T-Mobile, AT&T would cover only 80 percent of the population with its 4G network.

As expected, merger opponents including U.S. Cellular, the Rural Cellular Association, the Rural Telecommunications Group, MetroPCS and NTELOS also filed comments of opposition June 20, reiterating fears about decreased competition and higher prices for consumers if the $39 billion deal went through.

Public Knowledge Claims Deal Illegal Under Law.

The public-interest group Public Knowledge offered a new argument, claiming that the merger is illegal under Section 314 of the Communications Act.

As the group outlined in its filing, when a common carrier that provides international service “by any cable, wire, telegraph, or telephone line or system” seeks to acquire a wireless common carrier that provides international service, Section 314 of the Communications Act prohibits the transaction if it would “substantially lessen” competition either for international communication or in any related “line of commerce.”

“Undoubtedly, a transaction that reduces the number of possible international roaming partners from two to one ‘has the effect' of substantially lessening competition, if not creating an unlawful monopoly, between those geographic regions and ‘any foreign country' in direct violation of the language of the statute,” Public Knowledge wrote. “Even in those regions where a competing GSM carrier may remain, the loss of T-Mobile will ‘substantially lessen' competition for these services, both by removing an important provider of local roaming and by reducing the number of GSM-based networks able to provide national roaming agreements from two to one.”

Merger opponents, including Public Knowledge, claim the deal would create a “GSM monopoly” in the country, since AT&T, the largest GSM provider, would be acquiring T-Mobile, the second-largest GSM provider. The third largest GSM provider in the United States is Cincinnati Bell.

GSM (Global System for Mobile Communications) is a standard set to describe technologies for second generation, or 2G, digital cellular networks. Smaller, rural, and regional providers that operate GSM-technology networks would be at the mercy of AT&T to roam, AT&T's rivals say.

Public Knowledge argues that this makes the deal illegal: “Section 314 is an absolute statutory bar against the transfer. In the rare cases where, as here, a transaction triggers Section 314, the Commission has no choice but to deny the application.”

By Paul Barbagallo

For the complete filings, visit http://fjallfoss.fcc.gov/ecfs/comment_search/input?z=qglon  


Request Tech & Telecom on Bloomberg Law