* AT&T not waiting for government to free up spectrum
* Merger may delay passage of spectrum legislation to 2013
By Jasmin Melvin
WASHINGTON, March 24 AT&T Inc's (T.N) $39
billion bid to buy Deutsche Telekom AG's (DTEGn.DE) T-Mobile
casts doubt on the U.S. government's ability to swiftly deliver
policy to meet the booming demand for wireless services.
Wireless companies have long lobbied for help to deal with
what they see as a looming "spectrum crunch" as more consumers
turn to mobile devices including Apple Inc's (AAPL.O) iPhone to
surf the Web.
AT&T -- the No. 2 U.S. mobile carrier often criticized for
dropped calls and slow connection speeds -- is not waiting for
government remedies intended to free up airwaves for mobile
broadband to help it meet ever-growing demands for video and
But the move could slow legislation needed to free up
spectrum for auction to wireless carriers, a potential thorn in
the Federal Communications Commission's agenda.
"The way things work in Congress, there's competition for
what issues get the lawmakers' time and resources," Medley
Global Advisors analyst Jeffrey Silva said.
Top lawmakers have already signaled an interest in
scrutinizing the large-scale transaction.
The proposed merger would boost AT&T's spectrum holdings --
the airwaves used for wireless communication -- nearly 20
percent from 0.86 to 1.02 megahertz per million subscribers.
AT&T's Ralph de la Vega, chief executive of the company's
wireless unit, said in television interviews this week that
AT&T faced a spectrum shortage in the "short term."
A lack of spectrum would mean clogged networks, more
dropped calls and slower connection speeds for subscribers.
The deal would "add capacity sooner than any alternative"
and offers a quick solution "to the impending exhaustion of
wireless spectrum," the company said in a release.
"AT&T is aware that there are regulatory initiatives to
free up new spectrum but, in their world, they can't afford to
wait," Silva said.
LEGISLATION MAY STALL
The U.S. government has been hunting for underused airwaves
to make 500 megahertz of spectrum available over the next 10
years for wireless services.
But much of the plan hinges on TV broadcasters agreeing to
part with portions of their highly sought after airwaves and
Congress granting the FCC authority to hold incentive auctions
that would compensate broadcasters for that spectrum.
Broadcasters have raised concerns about giving up their
airwaves, and have considerable support among lawmakers because
of their coverage of home-town politics.
Paul Gallant, an analyst with MF Global, said AT&T's bid
for T-Mobile puts a dimmer outlook on the likelihood of
lawmakers moving spectrum legislation this year.
"We would now put the odds of Congress passing major
spectrum legislation in 2011 at 35 percent," he said in a
Gallant said lawmakers could view the merger as giving AT&T
what they need without controversial legislation.
The subcommittee has scheduled a hearing on spectrum for
The hearing could shed light on whether there's consensus
on Capitol Hill that a wireless spectrum crisis exists. "That
could be the biggest obstacle if there's not an acknowledgment
that there is a looming spectrum crunch," Silva said.
Still, the "win-win-win outcomes" of incentive auctions
freeing up airwaves, funding a public safety network and
reducing the deficit will prompt lawmakers to act by 2013,
But the FCC has urged for swifter action.
A senior FCC official, who spoke on condition of not being
named, said any potential shifting of existing spectrum among
wireless companies does nothing to solve the fundamental
problem of making more spectrum available to ease the crunch
the wireless industry faces.
"If we do nothing in the face of the looming spectrum
crunch, many consumers will face higher prices ... and
frustrating service -- connections that drop, apps that run
unreliably or too slowly," FCC Chairman Julius Genachowski said
in a speech this week at a wireless industry event.
He declined to comment on the proposed merger.
(Reporting by Jasmin Melvin, editing by Maureen Bavdek)
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Keywords: TMOBILE AT&T/SPECTRUM
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