AT&T CEO spoils for fresh fight with FCC

January 26, 2012

In case you had any illusions about the state of relations between  Randall Stephenson and Federal Communications Chairman Julius Genachowski, the AT&T CEO should have put them to rest by now.

Still smarting from his December withdrawal from a $39 billion plan to buy smaller rival T-Mobile USA,  Stephenson seems to be gearing up for another big fight with Genachowski, who opposed the deal. The executive wants Genachowski to be banned from setting bidding rules in the next wireless spectrum auction and spent the company’s quarterly earnings call complaining that the FCC’s spectrum ownership policy is inconsistent.

“My interpretation is these rules are so fluid you could drink out of them with a straw right now,” Stephenson told investors.

The FCC “has made it abundantly clear that they will not allow significant M&A” to help operators’ spectrum position he complained, adding that “unfortunately even the smallest and most routine spectrum deals are receiving intense scrutiny from this FCC.”

Specifically, Stephenson accused the FCC of following a new set of spectrum ownership rules to oppose the T-Mobile USA deal before then reverting back to older rules to approve AT&T’s much smaller purchase of spectrum from Qualcomm.

“We’re literally sitting here with a situation where we don’t know what spectrum caps apply,” he said when asked about which potential spectrum deals AT&T might be interested in pursuing.

The FCC and  Department of Justice  opposition to the T-Mobile USA deal stemmed from concerns that it would harm competition. The deal would have would have vaulted AT&T to a No. 1 position in customer numbers as well as giving it access to more spectrum. Their worry was that the elimination of T-Mobile USA the No. 4 U.S. mobile provider  as a competitor would leave the bulk of market power in the hands of AT&T and its biggest rival Verizon Wireless.

In his speeches, Genachowski  has long said that getting more spectrum to wireless service providers is a big priority of his tenure at the FCC.  But Stephenson is getting impatient.

“Despite all the speeches from the FCC we’re still waiting,” Stephenson told investors.

After losing the battle for T-Mobile USA,  AT&T hopes be able to buy spectrum is an auction that the FCC wants to run to sell spectrum from U.S. broadcasters. The regulator is currently seeking approval from U.S. lawmakers to give broadcasters a financial incentive to give back airwaves there are not using.

Congress passed a bill that would allow the auction but would limit the FCC’s ability to set the bidding rules in the auction.  Genachowski said in a speech at the Consumer Electronics Show that he needs to be able to manage the auction to ensure that it is open to smaller bidders as well as companies with deep pockets like AT&T.

AT&T’s next project is to try to convince lawmakers to deny the FCC the ability to set conditions for a spectrum auction that it wants to put in place.

“It appears the FCC is intent on picking winners and losers rather than letting these markets work,” Stephenson said.

The FCC provided a multi-part response to the AT&T attack. An FCC spokesman said that the regulator had opposed the merger because it felt it would  “violate the antitrust laws and result in higher prices for consumers, and less innovation and investment in the marketplace.”

“Those conclusions surely disappointed AT&T executives, but they followed directly from the facts and the law,” the spokesman said.

With regard to the spectrum auction, the FCC also defended itself:  “As the Chairman has said, our goal and intention for spectrum auctions is that every carrier – big, medium, or small – that needs additional spectrum should have a meaningful chance to bid for it,” said Rick Kaplan, the chief of the FCC Wireless Telecommunications Bureau, in an email reply.

A few hours after the Stephenson comments,  Public Knowledge, a Washington based public interest group sent out a statement describing his criticism as “unfortunate.” It argued  that “the FCC ha s a fine record in analyzing spectrum markets and in setting terms for auctions accordingly.”  Now put that in your glass and stir it.

(Reuters photograph by Brendan McDermid at AT&T conference explaining the T-Mobile USA merger proposal.)

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