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WASHINGTON (Reuters) - Smaller wireless carriers should be able to get a fair share of spectrum in the forthcoming U.S. auction to ensure the market is competitive, the Justice Department told the Federal Communications Commission in a filing made public on Friday.
The filing underlines the high value of the low-frequency spectrum that will be auctioned off, and delivers a blow to the two largest U.S. providers, Verizon Communications Inc (VZ.N) and AT&T Inc (T.N), in their efforts to acquire those airwaves.
"The Department concludes that rules that ensure the smaller nationwide networks, which currently lack substantial low-frequency spectrum, have an opportunity to acquire such spectrum could improve the competitive dynamic among nationwide carriers and benefit consumers," the Justice Department said.
Federal telecom regulators are drafting rules that would guide a major shakeup of ownership of airwaves that carry radio signals through a large and complex auction of some of the most attractive spectrum, to be held in 2014 or possibly later.
Verizon and AT&T worry that the FCC's auction rules would put caps on how much spectrum one provider could buy or otherwise limit their participation in the auction. Sprint (S.N) and Deutsche Telekom AG's (DTEGn.DE) T-Mobile, lagging far behind as No. 3 and No. 4, have lobbied for assurances they would be able to go to bat against their larger competitors.
In the filing, the Justice Department gave a boost to T-Mobile and Sprint, which currently own no or very little spectrum in the low-frequency band, valued because of its ability to better reach through walls and other obstacles.
"The Department believes it is important that the Commission devise policies that address the allocation of low-frequency spectrum in particular so that acquisitions of such spectrum do not hamper the ability of carriers in markets where that spectrum is important," the Justice Department said.
Signed by the department's antitrust chief William Baer, the filing urged the FCC to "maintain vigilance" against any efforts to further concentrate market power, warning that carriers may have incentives to buy spectrum not for better services or efficient expansion but just to deprive competitors of access to the valuable airwaves and to keep costs high.
"A large incumbent may benefit from acquiring spectrum even if its uses of the spectrum are not the most efficient if that acquisition helps preserve high prices," the filing said.
The Justice Department suggested the FCC may want to allow big carriers to buy "smaller blocks" of low-frequency spectrum "even if it seeks to restrict the acquisition of larger blocks."
Consumer advocates and Sprint welcomed the antitrust authorities' position, touting its importance for competition.
"The Justice Department is absolutely right," said Larry Krevor, Sprint's vice president of government affairs. "We are hopeful that the FCC will adopt policies which recognize the importance of low-band spectrum to wireless competition and the American economy as a whole."
AT&T and Verizon did not immediately have comment and T-Mobile declined comment. AT&T in the past has argued against valuing low-frequency spectrum higher than other airwaves.
Editing by Mohammad Zargham and Eric Walsh