FCC Grants First "Enhanced Review of Greater Concern"
The Commission released a Memorandum Opinion and Order granting the assignment of two Lower 700 MHz B Block licenses to an indirect, wholly-owned subsidiary of AT&T. As a result of the approved transaction, AT&T will increase its low-band spectrum holdings from 43 megahertz to 55 megahertz in CA 12 – Kings, thus triggering “enhanced factor review”. Additionally, AT&T will increase its low-band spectrum holdings from 49 megahertz to 61 megahertz in CA 5– San Luis Obispo, thus triggering “enhanced review” of “greater concern” because AT&T was already over the below-1-GHz screen (45 megahertz) when it entered into this transaction. This is the first FCC decision to review a transaction that would result in an entity that already holds approximately one-third or more of below-1-GHz spectrum in a market acquiring additional below-1-GHz spectrum in that market. Background on “Enhanced Review of “Greater Concern”: If the proposed transaction would result in an entity that already holds approximately one-third or more of below-1-GHz spectrum in a market acquiring additional below-1-GHz spectrum in that market, the public interest benefits of the proposed transaction would need to clearly outweigh the potential public interest harms (as compared to the less aggressive “enhanced review” factor where the transaction would only need to “outweigh” the potential public interest harms). Standard of Review Application: In this transaction, the Commission considered whether a proposed transaction would enhance, rather than merely preserve, existing competition, and took a more extensive view of potential and future competition and its impact on the relevant markets. The Commission limited its analysis to the local, not national, market and held that Lower 700 MHz D and E Blocks are relevant in its evaluation of proposed secondary market transactions that implicate increased below-1-GHz spectrum concentration. Notably, the transaction was contested by numerous parties (specifically CCA, T-Mobile, and Public Knowledge) on the grounds that it would diminish rivals’ ability to compete on price or offer innovative services. The competitive variables the Commission took into consideration were the following: (The Commission noted this is a non-exhaustive list of variables to be considered)
Total number of rival service providers;
Number of rival firms that can offer competitive service plans;
Coverage by technology of the firms’ respective networks;
Rival firms’ market shares;
Combined entity’s post-transaction market share and how that share changes as a result of the transaction;
Amount of spectrum suitable for the provisions of mobile telephony/broadband services controlled by the combined entity;
Spectrum holdings of each of the rival service providers
FCC Conclusion: The Commission found that competitive harm is unlikely in the affected markets as a result of the proposed transaction, notwithstanding the increased aggregation of below-1-GHz spectrum by AT&T. Specifically, the Commission noted:
Three other nationwide providers (Verizon, Sprint, and T-Mobile) all hold low-band spectrum in this particular market;
The three nationwide providers have access to low-band spectrum that would allow at least a 5x5 megahertz LTE deployment on below-1-GHz spectrum;
Each of the nationwide providers have access to spectrum above 1 GHz to combine with their low-band spectrum holdings for LTE deployment
Each of the other three nationwide providers have spectrum that would likely allow them to effectively respond to any anti-competitive behavior on the part of AT&T (each provider covers at least 70% of the population of the market.
In addition, the Commission found that the acquisition of additional aggregated spectrum would not likely foreclose expansion into unserved portions of the market because the particular spectrum at issue would not have been a likely means of expansion for rival service providers given the nature of their current spectrum portfolios in the local market. The Commission also noted that other entities had the opportunity to acquire the Club 42 spectrum on the secondary market. In balancing the unlikely competitive harms against the likely public interest benefits, those being increased network quality and better consumer experience resulting from the accelerated deployment of a more robust LTE network in the two affected license areas, the Commission determined the transaction warranted approval. The Commission did emphasize that while these benefits weigh in favor of approving the transaction, they may not be sufficient to support the approval of future transactions. Feel free to contact us with any questions.