FCC head says mergers can't solve spectrum crunch

LAS VEGAS Tue Apr 12, 2011 5:39pm EDT

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LAS VEGAS (Reuters) - No single market transaction, such as AT&T Inc's (T.N) $39 billion bid for T-Mobile, can solve the looming spectrum crisis facing the United States, the top communications regulator told Reuters on Tuesday.

Federal Communications Commission Chairman Julius Genachowski said changes in the marketplace will not change the underlying problem that spectrum demand is quickly outstripping supply. The chairman also criticized remarks that the spectrum crisis was more of a marketing spin than a nationwide problem.

AT&T last month announced plans to buy Deutsche Telekom AG's (DTEGn.DE) T-Mobile USA, in large part to deal with its impending spectrum shortage.

A spectrum shortage would mean clogged networks, more dropped calls and slower connection speeds for wireless customers.

The FCC hopes to "repurpose" 120 megahertz of spectrum through incentive auctions where television broadcasters would voluntarily give up spectrum in exchange for a portion of the auction proceeds.

But the agency needs Congress to grant it the authority to hold such auctions and divert some of the proceeds from the U.S. Treasury.

Analysts have said lawmakers could view the merger as giving AT&T what they need without controversial legislation, and some broadcasters have pointed to the bid as a reason to end calls for their highly sought after airwaves.

Genachowski knocked down claims that a combined wireless entity would nullify the spectrum crunch for mobile broadband.

"The math that drives the spectrum crunch is aggregate demand from all consumers in the U.S. compared to aggregate supply of spectrum," he said in an interview at the NAB Show, broadcasters' annual conference in Las Vegas.

As the explosive demand for wireless devices such as Apple Inc's (AAPL.O) iPhone continues, supply of spectrum will also need to increase to prevent service disruptions.

"We have to free up new spectrum for mobile broadband in order to close the gap between aggregate demand and aggregate supply," Genachowski said, suggesting that a merger would not change the amount of spectrum available for wireless services.

Genachowski declined to comment on the particular transaction between AT&T and T-Mobile, which the FCC and Justice Department are expected to take at least a year to review.

But he blasted remarks made by John Hane III, an attorney who concentrates on spectrum licensing and reallocation, that a looming nationwide spectrum did not exist.

"It is a potential shortage of spectrum in a few densely populated areas sometime in the next decade," Hane said earlier in the week at the conference. "What we're talking about here is taking the better spectrum and giving it to the mobile industry to reduce their deployment costs."

Genachowski noted that the top 12 markets represent nearly 40 percent of the American population.

"That argument shortchanges rural America, and it shortchanges urban America," he said. "The data that we've pointed to makes it crystal clear that there is a looming spectrum crunch."

BROADCASTERS' CONCERNS

"The single biggest thing we can do to free up contiguous, high quality spectrum for mobile broadband is incentive auctions," Genachowski said.

"No one has suggested a single idea that could have as positive an impact," he added.

Freeing up airwaves, funding a public safety network and reducing the deficit are among positives associated with incentive auctions.

But broadcasters are wary of the auctions' consequences for those who choose not to part with any spectrum. The FCC has proposed repacking the TV band to create the large blocks of spectrum best suited for wireless use.

Repacking could change the frequencies some broadcasters are carried on, potentially creating interference problems and degraded signal strength.

Genachowski noted that the agency has considerable precedent and experience in dealing with repacking that's fair to broadcasters.

If key stakeholders constructively joined in the debate, Genachowski said their legitimate concerns could be addressed quickly given the agency's extensive experience in this area.

(Reporting by Jasmin Melvin; Editing by Gary Hill)

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