Congress close to green lighting spectrum auctions as Verizon and AT&T get ready to bid high

Do you remember the reason why AT&T was willing to spend $39 billion for T-Mobile? AT&T was going after the wireless spectrum owned by the nation's fourth largest carrier. With the amazing growth in the smartphone and tablet markets, data usage is growing rapidly every year and this requires more and more spectrum. That is why both Verizon and AT&T are excited to hear that Congress is on the verge of giving the green light to an auction of some more wireless spectrum currently owned by Uncle Sam. President Obama could sign the legislation that would allow the auction to go through, as soon as this weekend.

Another part of the legislation would allow the FCC to create unlicensed airwaves for Wi-Fi use. Google and Microsoft have been pushing for this white space spectrum for unlicensed applications. According to reports, the television broadcasters' spectrum being auctioned would generate as much as $16 billion. The legislation also wouldn't prevent any company from bidding for spectrum, but could limit the amount of spectrum won by any one company. The FCC and CTIA both have been trying to get an incentive auction which could actually take years to plan before it actually happens.

Not everyone is thrilled about giving up television spectrum to mobile carriers. Gordon Smith, president of the National Association of Broadcasters, said in a statement, "Tens of millions of Americans rely every day on local TV broadcasters for news, entertainment, sports and life-saving weather warnings. We look forward to working with Congress and the FCC to implement an incentive auction program that does not jeopardize that service."

Republican Representative Fred Upton from Michigan, who heads the Energy and Commerce Committee, said that to the extent that these airwaves are used to build the next-gen wireless network, the auction will result in job creation and breakthroughs in technology. The auction also will give $7 billion and spectrum for a national network for emergency workers. This is a direct result of the investigation into 9/11 which resulted in the discovery that more spectrum is necessary for police and firefighters.

Verizon and AT&T were the big winners in a 2008 auction of spectrum for smartphone use. The duo spent a combined $16 billion to purchase the spectrum. Now, 4 years later, both carriers need more spectrum. During an earnings call for the December quarter, AT&T CEO Randall Stephenson said that the carrier's number one issue is availability of spectrum.

After AT&T withdrew from its proposed purchase of T-Mobile, the FCC as a consolidation prize, allowed the carrier to buy some spectrum from Qualcomm in the 700MHz region for $1.9 billion. In December, Verizon paid $3.6 billion to buy 122 AWS spectrum licenses from SpectrumCo.

source: Bloomberg