Thursday night, the Federal Communications Commission blessed AT&T by approving their $1.93 Billion purchase of Qualcomm 700MHz spectrum holdings. AT&T originally worked out a deal to purchase this spectrum over a year ago, but this purchase was lumped in with the T-Mobile merger by the FCC. The FCC only recently re-separated the deal. Most of the approval conditions placed on the deal were relatively minor. Both AT&T and Qualcomm were pleased with this outcome.
Several smaller spectrum license holders in the lower 700MHz blocks were calling on the FCC to require interoperability as a condition of approval of this action. And this seemed reasonable to me, and I was hoping the FCC was going to require it. These carriers have been handicapped by what appears as AT&T and Verizon trying to control chipset manufacturers into creating chips that would only run on their portions of 700MHz spectrum. Whether intentional or not, that has been the result. And AT&T and Verizon sure are not complaining.
These carriers asked the FCC to consider requiring AT&T to start selling devices that ran on their A-Block 700 spectrum too. This way chip manufacturers would essentially have to make chipsets that run on the entire Lower 700 band, and thus these carriers would finally be able to secure chipsets for OEM's to start making devices that run on their spectrum. However, the FCC conditions only went so far as to require that AT&T not set up it's network in a way that would prohibit roaming, should other carriers sell devices that were capable of using this spectrum.
In essence, AT&T (and Verizon too) are benefitting from their competitors being shut out from using their 700 spectrum. Because these small carriers cannot get chipsets that run on their frequencies. AT&T and Verizon are large enough that they can guarantee numbers of chipsets high enough that will get chip manufacturers to create custom units that run on their frequencies only. The smaller carriers cannot do that.
AT&T has claimed in the past that they aren't being anti-competitive and throwing their weight around. They want us to believe it's just a coincidence that comes to their benefit. But AT&T went as far as to say they would cancel their deal with Qualcomm for this spectrum if interoperability was required. This appears to support the idea that AT&T is manipulating every advantage it can to essentially shut out their competition. Also, if the lower 700 holders cannot use their spectrum, it may mean they will have to sell it. And probably for less than it could be worth with full interoperability. And AT&T would certainly be there and ready to try to scoop it up.
For those of us who really want to see 700MHz interoperability for the sake of meaningful wireless competition, do not fret. The FCC says that they are aware of the problem, but could not solve the problem with this deal. "Even if we assume that the lack of Lower 700 MHz interoperability causes significant competitive harm, such harm already existed independent of the license transfer applications before us," said the FCC in the order. "We believe the better course would be to consider the numerous technical issues raised by the lack of interoperability through a rulemaking proceeding, and we plan to begin such a proceeding in the first quarter of next year."