(Adds analyst comment, context)
By Alina Selyukh and Marina Lopes
May 15 U.S. telecom regulators on Thursday voted
to limit how much spectrum Verizon Communications Inc and
AT&T Inc will be able to buy in next year's auction of
highly valuable wireless airwaves.
In a 3-2 vote along party lines, the Federal Communications
Commission approved a plan that would reserve part of the
spectrum in each market for carriers that do not already have
substantial blocks of low-frequency airwaves there, largely
restricting the participation of Verizon and AT&T.
Sprint Corp and T-Mobile USA Inc had urged
the FCC to ensure their two biggest rivals did not dominate the
auction. FCC Chairman Tom Wheeler had agreed, saying last month
that Verizon and AT&T already controlled almost two-thirds of
the coveted low-frequency airwaves.
The final rules, however, represent something of a
compromise that reserves some airwaves for smaller carriers
while ensuring that larger providers would be able to get
sizeable chunks of spectrum in the unreserved portion.
The FCC's rules are based on current market structure,
meaning that if Sprint acquires T-Mobile, for example, the rules
would be revisited and could be rewritten.
Sprint shares closed up 6 percent and T-Mobile shares closed
up 1.3 percent on Thursday.
"Investors are responding to hope of a merger. The less
stringent the rules are on spectrum, the more leeway you have to
allow one. The more even the playing field for all providers,
the less you are excluding a potential combination of the two,"
said Roger Entner of Recon Analytics.
The auction, planned for mid-2015, would be a first
opportunity in years for wireless carriers to buy the
low-frequency airwaves considered the beachfront property of
radio spectrum for their reach and strength.
The rules set on Thursday would reserve up to 30 megahertz
of spectrum in each market for bidding by non-nationwide
carriers or companies with less than one-third of low-band
spectrum in that market.
The reserve would kick in after the auction raises enough
spectrum and revenue to help fund a new $7 billion public safety
network and pay back TV stations, which would volunteer to
relinquish airwaves for wireless carriers to buy in the auction.
Verizon and AT&T applauded the compromised plan and AT&T
said it plans on bidding at least $9 billion for 20 MHz in the
Verizon and AT&T had strongly opposed the plan, arguing it
was unfair, would complicate the auction and could hurt how much
money the FCC ultimately raises in the sale.
The FCC also voted along party lines to expand the so-called
spectrum screen, a calculation of what airwaves are usable for
wireless, to include more of the airwaves currently controlled
by Sprint and Dish Network Corp, among other things.
Any spectrum acquisitions involving low-frequency airwaves
or deals that tip one company over one-third of the screen in a
market would trigger extra scrutiny.
(Reporting by Marina Lopes; Editing by Paul Simao and Dan