Some experts accuse T-Mobile CEO John Legere of leveraging his personal celebrity to lobby for government favors that could cost taxpayers billions in lost revenue.
In April, T-Mobile—along with Sprint, DISH Network, and others—established the “Save Wireless Choice” coalition, which employs modern, social media-based lobbying tactics to build support for a petition asking the Federal Communications Commission to increase the amount of wireless spectrum that is set aside for “small” carriers at next year’s auction, according to Politico.
T-Mobile and its allies argue that the two largest wireless providers, AT&T and Verizon, are consistently able to outbid smaller competitors at spectrum auctions, allowing them to secure their dominant market positions without having to compete on even terms. (RELATED: DISH Set Up a Bunch of Companies to Claim Billions in ‘Small Business’ Credits)
“Right now, AT&T and Verizon are feverishly protecting their wireless duopoly by hoarding spectrum at the expense of American consumers,” Legere wrote last week in a blog post. “They are trying to control the FCC like they do these airwaves, and I think it’s important that consumers really understand what is at stake.”
The FCC has recognized that risk, and has responded by reserving a portion of the spectrum available at each auction for smaller carriers, which under the current definition includes every wireless provider except AT&T and Verizon. The Commission currently plans to reserve three out of seven “blocks” of spectrum in this manner at its next auction in 2016, but the SWC coalition is pushing to have that figure increased to four blocks.
In addition to leveraging Legere’s 1.4 million Twitter followers to disseminate its message on social media, the SWC coalition has also sent the charismatic Legere to Capitol Hill for meetings with (primarily Democratic) lawmakers, some of whom have since written letters to the FCC supporting the set-aside request.
During a “whirlwind visit” to Washington, D.C. last week, Legere also met face to face with FCC Chairman Tom Wheeler to advocate for the set-aside, telling Wheeler that it would prevent AT&T and Verizon from becoming “the de facto gatekeepers of the Mobile Internet.” (RELATED: Corruption at the FCC? TV Exec’s Donate to Dem Lawmaker, Get Million-Dollar Rule Exemption)
Roslyn Layton, a PhD Fellow at Aalborg University in Copenhagen and a Visiting Fellow at the American Enterprise Institute, told The Daily Caller News Foundation that the coalition’s deployment of Legere is an extension of T-Mobile’s wildly successful marketing strategy, which relies heavily on exploiting the media attention Legere receives to portray competing carriers as out-of-touch, anti-consumer dinosaurs.
“A lot of what marketing is about is telling the right story,” she noted, but “when it comes to trying to manipulate the auction, that’s not fair to Americans.”
Layton explained that the auction system is designed not only to increase the availability of wireless spectrum, but also to earn revenue for taxpayers, and that reserving spectrum for favored companies cuts into that revenue by excluding the wealthiest bidders.
Nor is the set-aside fair from a market perspective, she claimed in a blog post for Multichannel News, pointing out that it forces AT&T and Verizon to pay higher prices for a smaller share of the total spectrum while enabling their rivals to secure a larger share at discounted prices.
“Anytime the FCC gets into the slippery slope of deciding which operators are most deserving of subsidies, it’s always trouble,” Layton told TheDCNF. “The spectrum auction is not supposed to be a handout for the most popular CEO’s; the purpose of the auction is to maximize revenues.” (RELATED: The FCC’s Obsolete Wireless Competition Mindset)
Moreover, the FCC’s previous experience with spectrum set-asides suggests that rather than enhancing competition, the practice is actually detrimental to consumers, argues Will Rinehart, Director of Technology and Innovation Policy at the American Action Forum, in a blog post Thursday.
The FCC reserved two blocks of spectrum at its 1997 auction in an effort to promote competition, but according to Rinehart, the primary effect was to concentrate spectrum into the hands of companies with limited abilities to utilize it.
Whereas 99.85 percent of the unrestricted spectrum was made serviceable within the required time frame, he points out, nearly 68 percent of the spectrum in the reserved blocks failed to meet that obligation. “Even today,” Rinehart asserts, “portions of these two blocks remain unused, and the small firms that did bid for spectrum largely sold their licenses back to larger companies.” (RELATED: Verizon Wireless Looks to Sell Unused Spectrum for Billions of Dollars)
“Reserves act as a subsidy,” he concluded, “bringing into the market actors that might not be able to properly deploy spectrum.”
At the moment, it seems as though the FCC might even agree with that assessment. Staff familiar with the FCC’s deliberations on the issue told Reuters recently that while the Commissioners have yet to make a final decision, they are “leaning toward rejecting” T-Mobile’s request.
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