BellSouth Spectrum Warehousing Playing Big Role in FCC Negotiations
The divestiture of 2.5 GHz and 2.3 GHz spectrum held by BellSouth in the Southeast as a condition of the AT&T- BellSouth merger has emerged as one of the issues getting significant discussion at the Commission, as commissioners and their staff hash out a final merger order. Sources said Comrs. Copps and Adelstein have made spectrum one of the key issues to earn their support. But AT&T and BellSouth are considered unlikely to budge and concede divestiture of the spectrum as a concession to win approval of their merger.
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“My reading of the tea leaves is that this one is 2-2, that the Democrats are really pushing for a divestiture but that the Republicans are really opposing it,” said Rudy Baca, a wireless analyst and former FCC staffer. “If there are enough other conditions that are conceded by the Republicans to the Democrats, the ultimate order is not likely to contain a divestiture. But it’s a very fluid situation. The problem is, Commissioner McDowell is not participating. It’s 2-2, and the Democrats have a lot of leverage and they're using it.”
Baca agreed with arguments by proponents of divestiture, led by Clearwire, that BellSouth’s ownership of the spectrum in the Southeast is “problematic” for anyone trying to build a national network using the spectrum. But he said Clearwire faces an uphill fight. “Clearwire is doing a good job,” he said: “But I think in the end this is one of the many things that will be traded, but the condition of divestiture is the least likely thing to occur in the final order.”
An industry source said the spectrum held by BellSouth is critical to building a nationwide network, especially in La., Fla., and Ga., where the company had the largest holdings. “They have a substantial amount of spectrum in the lower Southeast area. There’s really no other way to get your hands on that spectrum,” the source said: “The next best band would be 2.3 GHz, but they have all of that as well. The real rub is the [combination of] 2.5 and 2.3 they have.” The source said the issue seems to be attracting interest on the 8th floor. “I suspect that what they [Copps and Adelstein] would try to do is get voluntary divestiture first. That’s way preferable. The Democratic commissioners would not hesitate to order divestiture, but it takes more than just the 2 of them.”
“It could happen,” said a regulatory attorney. “It makes sense if it’s back in play… There’s nothing in competition policy or the Antitrust Act to order divestiture here based on precedent, but politically it could be a different thing.”
Sprint Nextel and Clearwire could be the beneficiaries if the merged company must sell off the spectrum, since they're the dominant holders of the spectrum nationwide. Clearwire met with Copps this week to discuss the issue (CD Oct 20 p7). The issue has surfaced in the past but only recently has emerged as a major point of discussion at the Commission (CD June 7 p7).