Outlook for Incentive Auction Remains Unclear, Say Stephenson, Pryor

"I haven’t a clue” how the auction will go, Stephenson said. “You not only have to have a structure that incentivizes people to come in and buy and pay for up the spectrum, but you also have to have a structure that incentivizes people that own the spectrum to bring it to market,” he said. “The FCC is playing an interesting role here -- they're kind of like a broker.” Stephenson said AT&T needs “a broad footprint with a certain amount of depth” from the spectrum it buys. “If you don’t get enough broadcasters coming into the marketplace … then the auction will fail, in and of itself,” he said.

"There’s still a question mark,” said Pryor, chairman of the Senate Communications Subcommittee. The FCC’s design for the auction is critical, he said. “I think that they want to see it be a success, and I think have a lot of motivation to make it a success,” he said of FCC officials. But Pryor said there’s no spectrum crunch in most areas of the U.S., except in and around the largest cities. “One of the questions is where you need the spectrum the most, the most critical need, is in the urban areas,” he said. But that spectrum also could prove the most valuable to broadcasters in the same markets targeted by carriers, he said. Broadcasters in these markets “may be the most reluctant to give up their spectrum,” he said.

Pryor said he’s not sure whether the FCC should place limits on how much spectrum any carriers can buy in a given market in the auction. “I want to see where the FCC comes out on that,” he said. “I do think the FCC wants to get it right. … You want to be careful that you're not limiting these companies from innovating and investing. You want to make sure in the end that you're not hurting consumers."

"One of the key motivations is money into the United States Treasury,” Stephenson said. “To the extent that we have an auction where two of the players who have the most interest in participating are excluded or limited, arithmetically, you're going to affect the amount of money that the Treasury yields from the auction.” While not mentioning Sprint Nextel or T-Mobile by name, Stephenson said neither bid in the 700 MHz auction. “The two that people would like to see get most of the spectrum are the two companies that did not even participate in the last auction,” he said: Keeping AT&T and Verizon Wireless from bidding “feels like a big gamble for something that’s so important as a big spectrum auction like this.”

Asked about compliance of carriers like AT&T with data requests from the federal government, Stephenson said he normally doesn’t comment on matters of national security. News broke last week that the government was secretly gathering phone records of millions of Americans (CD June 7 p1). The American Civil Liberties Union has already filed a lawsuit against the Obama administration. “Everybody that’s even attached to this industry will from time to time get subpoenas or court orders for information,” Stephenson said. “We strictly, very strictly, comply with those orders and warrants. I really can’t go much further than that.” He added when asked a second time, “privacy and security of data is critical” to AT&T.

Pryor said questions have arisen before about the liability carriers might face for making records available to the government. “They were looking at possible liability for complying with these court orders,” he said. “I don’t think we ought to put our companies in that position. … I've tried to help with that over the years.”

Pryor said members of both the House and Senate intelligence committees have defended the National Security Agency surveillance programs, as has President Barack Obama. “When you really get inside the programs and know what they're doing and know what’s really going on, you get more comfortable with it,” he said. “It’s an ongoing discussion we're having in the Senate. I'm sure that we're going to have some hearings.” Stephenson said he has known Tom Wheeler, Obama’s nominee as chairman of the FCC, for a long time. “He is a big brain, he is a progressive thinker, he understands this industry,” Stephenson said. “I suspect Tom and I don’t agree on every policy issue, but I expect it to be a very fruitful FCC, I think it'll be an FCC that you see begin to move really critical issues forward."

Pryor’s subcommittee has held three of four planned hearings on an overview of the telecom world, including a wireless hearing last week (CD June 5 p3), Pryor said. “One of the things we talked about in the wireless hearing was spectrum, spectrum, spectrum,” he said. “It seemed like whatever issue it was, it kept coming back to spectrum.” The federal government needs to get the rules right for spectrum “long term,” he said. “If we're going to ask the Department of Defense to move off an area of the spectrum, that’s a big deal, they have a big investment in infrastructure,” Pryor said. “They have a big investment in technology. They have handsets. They have all these missiles and drones and all kinds of things that are using the spectrum right now.”