(Adds more comments from Stephenson, background on Aloha)
SAN FRANCISCO, Oct 19 (Reuters) - AT&T Inc T.N said on Friday it plans to participate in an upcoming government auction of airwaves in the 700-Megahertz spectrum band, but it is still deciding whether to bid for a portion of the spectrum reserved for open access.
AT&T Chief Executive Randall Stephenson said the spectrum would be prime property for wireless companies and would be a key element for delivering data services to mobile devices in the future.
The airwaves to be sold in the 700-megahertz band can travel long distances and penetrate thick walls. The spectrum will be freed up once broadcast television networks switch to digital from analog in 2009.
“When it comes to buying spectrum, it is the best spectrum you are going to find for a long time,” Stephenson said at the Web 2.0 Summit in San Francisco. “We’ll participate in the auction.”
Stephenson was less certain about whether the biggest U.S. mobile phone provider planned to take part in a portion of the auction that requires the winner to use those airwaves to deliver services to any device or software.
Currently, wireless carriers restrict the models of cell phones that can be used on their networks. They also limit the software that can be downloaded, such as music or Web browser software.
The U.S. Federal Communications Commission has suggested a $4.6 billion minimum price for the block of open-access airwaves. The requirement is expected to apply to 22 megahertz of the 62 MHz of spectrum to be sold.
When asked whether the company plans to bid for that block of the spectrum, Stephenson said it was not sure it would bid and that the company was still studying whether such an investment would be profitable.
"Is there a business model? I am not sure if there is one or not," said Stephenson during a question-and-answer session at the conference. Verizon Wireless, owned by Verizon Communications Inc VZ.N and Vodafone Group Plc VOD.L, has asked a federal court to overturn the open-access rules because the conditions are unconstitutional and the FCC overstepped its authority when it approved them on July 31.
The open-access rules have the support of Google Inc GOOG.O, a potential bidder in the auction. Earlier this year, Google surprised the telecoms industry by announcing it planned to take part in the auctions.
Stephenson said AT&T needs more capacity to offer data-rich services such as those offered by Apple Inc's AAPL.O iPhone. AT&T is the exclusive U.S. service provider for the iPhone.
“It’s very obvious to us that we are going to have to add to our spectrum holdings,” he said.
Earlier this month, AT&T announced that it would buy the wireless airwave licenses of privately held Aloha Partners LP for about $2.5 billion.
AT&T said the licenses have coverage for a potential 196 million customers in 281 markets, including 72 of the top 100 U.S. markets in the 700-megahertz frequency band.
Stephenson joked that it was the first time he had ever paid so much for a company with no revenue.
Shares of AT&T fell 44 cents to $41.37 in New York Stock Exchange on Friday.
(Reporting by Daisuke Wakabayashi and Michele Gershberg in San Francisco)
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