Possible AT&T Shift on Open Access May Signal Seismic Shift In 700 MHz Auction

Until now, the existing incumbents of all shapes and sizes have presented a solid, immovable wall of resistance against any kind of “open access”/wholesale obligation attached to a license. In the context of the Frontline proposal in particular, carriers have railed against it as a “poison pill” that would scare away potential bidders and reduce the projected $15 Billion auction revenue to spare change and half a wooden pencil.

Which makes this tepid expression of possible interest in a Frontline “E Block” license despite an open access condition by AT&T Senior Vice President Robert Quinn Jr. epic news and potentially another major win (on par with support from Senator John Kerry and Presidential candidate John Edwards) for the forces of open access. According to the article — reporting on an interview Mr. Quinn gave to the Center for Public Integrity’s Drew Clark:

“It’s a different business model for us, but one that we’d be looking at,” Quinn said in an interview with the Center for Public Integrity’s “Well Connected” Project. “If, in the end, that spectrum is attached to public safety, and for example there’s a wholesale requirement, we’ll take a look at it.”

AT&T is waiting for final FCC rules before deciding whether or not to place a bid. “Our position is that we need to see the specific rules the FCC adopts for the auction before determining our level of participation,” AT&T spokesman Michael Balmoris said on Monday. The FCC rules are expected by July.

That looks pretty tame, until one considers the speaker and the context. In spectrum lobbying terms, this is roughly the equivalent of Iranian President Mahmoud Ahmadinejad saying that, under the right circumstances, he would accept an invitation to visit Israel and meet with Israeli Prime Minister Ehud Olmert.

More importantly, AT&T’s statement that it would consider bidding on an E Block license with an open access condition has significant implications for the debate about the auction itself. Statements churned out by incumbents and their think tank cheerleaders — such as this Washpo Op Ed from two CTIA consultants/think tank dudes — portray open access as so onerous that it will kill the auction revenue. AT&T’s statement that it would consider bidding on open access licenses demonstrates that such arguments are utterly bogus. Because if AT&T would consider bidding, you can bet your last cell tower that every other major incumbent would conisder it as well. What, sit it out and let all that spectrum go to a rival?

So why would AT&T even hint at a change in position, given how deeply this undermines the “absolutely no, never, you must be mad” rhetoric of the anti-open access opposition? For wild speculations, see below . . . .

To speculate wildly, recall that last month I observed that AT&T and Verizon both desperately want national coverage out of this auction to counter cable voice competition with a high-power quadrupple play. That means either something national like Frontline’s national public safety/wholesale operator “E Block” proposal or getting really huge geographic license coverage areas (the Regional Economic Area Grouping or REAG licenses).

Despite the assumption by a number of reporters last April that Kevin Martin’s blessing would guarantee the large license areas, the VZ and AT&T effort to get large license blocks (along with Google, Wireless DBS, and the Public Interest Spectrum Coalition, that want large license blocks to promote the likelihood of a new entrant challenge the telco/cable broadband duopoly) has run into serious trouble. Commissioner Adelstein recently warned that without support from public safety and without evidence of a likely “third pipe” bidder, that neither the Frontline proposal nor the proposal for large license area blocks stood much of a chance. Adelstein apparently repeated these comments at NXTcomm — the big Telco convention last week in Chicago — where he also publicly supported open access. According to Mr. Quinn, Commissioner Adelstein repeated these sentiments to AT&T’s new CEO Randall Stephenson when they had their “meet and greet” at NXTcomm.

So, like France’s Henry IV famously declaring that “Paris is worth a mass,” AT&T must decide whether national coverage is worth open access. Absent the full throttle support of public safety, Frontline’s chief hope lies in support from Silicon Valley and the Public Interest Spectrum Coalition. But support from these constituencies is utterly contingent on open access.

So I suspect Mr. Quinn’s coy hint that AT&T would possibly consider bidding on an E Block with an open access condition amounts to a plea to the Commission to refrain from flushing Frontline down the spectrum potty just yet. I have no doubt that AT&T would still prefer to see an E Block without an open access condition. But in the meantime, with the odds of getting a band plan that maximizes the number of REAG licenses looking less good all the time, AT&T may want to keep Frontline as a lifeline to national coverage. Besides, given AT&T’s success in the wireline world (in its old incarnation as SBC) in killing DSL line sharing, AT&T may hope to win a national E Block license then get the Commission to eliminate the open access condition after the fact.

But for whatever reason, AT&T has definitely shifted the nature of the debate. Even if AT&T subsequently decides to turn up its nose at a license conditioned on open access, its admission that it would even consider bidding an an open access license under the right set of rules demonstrates that open access is not an auction killer. Even incumbents will consider bidding on open access licenses. And we can expect that other possible bidders — such as the hoped for third pipe new entrant — are also waiting to see the FCC’s final rules before deciding whether or not to make a bid for the spectrum. If even an incumbent like AT&T needs to see the final rules first before it can commit, how do you expect someone entirely new to the game to judge whether its worth playing without knowing the rules?

Stay tuned . . . .

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