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Bidding Rules Becoming Clearer for Upcoming Airwaves Auction

There's a little something here for almost every wireless carrier to love and hate.

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Correction: The FCC is considering reserving up to 30 MHz of licenses in local markets for reserved bidding. A previous version of the story incorrectly said the agency could set aside up to 30 percent of licenses.

Federal officials plan to reserve a portion of licenses sold in a TV airwaves auction next year for smaller wireless carriers under a plan floated recently by Federal Communications Commission Chairman Tom Wheeler.

Overall, the plan has something for most wireless carriers to both love and hate. While it allows all wireless carriers to bid for airwaves in an effort to drive up revenue from the sale, the plan also potentially sets aside licenses for smaller carriers. And it creates a new standard for how many licenses a wireless company can hold, which could make it easier for Verizon Wireless and AT&T to acquire more airwaves in the future, but hurt Sprint’s ability to do the same.

The proposal represents an effort by Wheeler’s aides to meet two broad, conflicting goals of the auction: Raise as much money as possible (by selling licenses to wireless giants AT&T and Verizon) while increasing competition in the wireless market (by selling licenses to smaller carriers that need more prime airwaves to compete for subscribers).

Details of Wheeler’s plan began leaking out Friday evening after FCC staff and company lobbyists were briefed on some details. Wheeler aides began briefing some lawmakers and staff on Capitol Hill earlier this month. The FCC could vote on the plan and release details to the public as soon as mid-May, although some details may change in the coming weeks as industry lobbyists swarm the agency.

“All who want to participate in the auction will be able to bid,” Wheeler said in a written statement. “In order to assure coverage and competition in rural America it may be necessary to assure no one can monopolize the bidding.”

The rules are for an auction of airwaves set to be reclaimed from TV stations. The FCC is trying to convince station owners in urban markets to give up their airwaves for an undetermined amount of money and either go out of business or share another station’s airwaves.

According to four people briefed on the plan, the agency would create two separate classes of licenses for sale in the TV airwaves auction next year, restricted and unrestricted.

All wireless companies could bid for the licenses, which would be mostly paired in 5 megahertz blocks in markets across the U.S. If bidding reaches a to-be-determined threshold price, the agency would set aside up to 30 megahertz percent of the licenses in local markets for companies that don’t currently hold a lot of nearby airwaves.

That would prevent AT&T and Verizon Wireless (as well as U.S. Cellular, which dominates certain markets) from winning those so-called restricted licenses. It could also pit the two wireless giants against each other in a battle for the unrestricted licenses.

Currently, the agency thinks it will have about 85 MHz of airwaves from broadcasters in urban areas to auction off, sources said. There could be more licenses available in rural areas.

What’s more, the agency has proposed setting limits on restricted licenses so the winners couldn’t immediately flip them and sell them to the larger wireless carriers, sources said.

Wheeler is also talking about adopting new rules, called a “spectrum screen,” which generally limit how many licenses a wireless carrier can hold. Wireless carriers have been arguing for several years about how to set the limits. Under Wheeler’s plan, airwaves held by Sprint and Dish Network that were previously excluded from the screen would now be factored into the calculation.

That might make it easier for AT&T and Verizon to add to their spectrum holdings but could be a headache for Sprint, which controls a significant amount of airwaves (albeit ones that aren’t as valuable as their competitors) and has made noises about buying T-Mobile.

The agency uses its screen on a case-by-case basis when companies try to buy licenses from other carriers. The new limits wouldn’t be used to hinder carriers from acquiring spectrum in the TV airwaves auction next year, but would apply in the future.

Correction: The FCC is considering reserving up to 30 MHz of licenses in local markets for reserved bidding. A previous version of the story incorrectly said the agency could set aside up to 30 percent of licenses.

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