FCC Will Vote on Setting Aside Spectrum for Smaller Carriers in Auction

Plan limits how much AT&T and Verizon can bid on

One thing you can say about FCC chairman Tom Wheeler: He's not afraid of controversy. After causing an uproar with his net neutrality proposal earlier this week, he is now ending the week poking another hornet's nest with his proposal to limit how much spectrum wireless companies can bid on during the upcoming spectrum auction set for 2015.

A lot is riding on the auction, which is intended to raise billions of dollars for the government, fund a first-responder network, and reallocate more wireless spectrum to feed the growing mobile consumer market.

Worried that the two biggest wireless firms, AT&T and Verizon Wireless, will "run the table" at the auction and gobble up all the most desirable spectrum in the auction, Wheeler proposed a plan to set aside a good chunk of spectrum exclusively for the smaller carriers—those that hold less than a third of the spectrum in any given market.

The commission will vote on the mobile spectrum holding proposal May 15, along with the hot-button proposal for net neutrality, and a complex order on the rules of the road for executing the spectrum auction.

Wireless firms including T-Mobile and Sprint, along with a number of consumer groups have pushed hard on the FCC to limit how much spectrum the two largest wireless firms, AT&T and Verizon, can acquire in the auction.

According to the FCC, AT&T and Verizon hold a combined share of almost two-thirds of the most desirable portion of spectrum.

Under the FCC's scheme, it won't be possible for one or two bidders, namely AT&T and Verizon, to "sweep the auction," Wheeler wrote in a blog post.

"The net effect…is to promote a robustly competitive auction with all parties vying to establish a fair market price," Wheeler said.

Knowing Wheeler was heading in this direction, AT&T warned the FCC that it might take its billions of dollars and sit out the auction.

But the FCC is calling AT&T's bluff. "They said they want to participate," an FCC official said Friday on a call with reporters. "They would still have access to spectrum in every market. There will be plenty of spectrum for all bidders," the official said.

Wheeler is likely to get the votes from the two Democratic commissioners, but not the two Republicans. Speaking before the Mobile Future Forum in Washington, D.C. Thursday, commissioner Ajit Pai blasted Wheeler's proposal for "picking winners and losers" in the spectrum auction and risking its ultimate success.

"Instead of good, old-fashioned competition, the chosen few would have spectrum set aside especially for them," Pai said. "The FCC should not limit carriers' ability to participate. … The inevitable effect of a policy that limits participation will be less spectrum for mobile broadband, less funding for national priorities, a higher budget deficit, and an increased chance of a failed auction."

Wheeler's plan is also likely to draw fire from Republicans, who have reminded Wheeler on numerous occasions that he shouldn't impose any limits on the bidding.