In an otherwise unremarkable order approving AT&T’s acquisition of multiple licenses in the 2.3 GHz band, the FCC yesterday changed its rules on spectrum concentration.  Generally speaking, the FCC reviews an acquiring firm’s spectrum holdings and applies a “spectrum screen” to ensure that no more than one-third of the total pool of available broadband spectrum resources rests with any one company in any given market.  Yesterday’s order, however, increasesthe screen to incorporate twenty megahertz of Wireless Communications Service (WCS) spectrum into the total amount of spectrum the FCC considers useful and available for broadband use. 

As a result, the new spectrum screen for wireless transactions and auctions is as follows: 

  • 102 megahertz or more of cellular, PCS, SMR, 700 MHz, and WCS spectrum, where neither BRS nor AWS-1 spectrum is available;
  • 121 megahertz or more of spectrum, where BRS spectrum is available, but AWS-1 spectrum is not available;
  • 132 megahertz or more of spectrum, where AWS-1 spectrum is available, but BRS spectrum is not available; or
  • 151 megahertz or more of spectrum where both AWS-1 and BRS spectrum are available.

The FCC reasoned that “in light of our recent revisions to the WCS service rules to facilitate the provision of mobile broadband services, we find that 20 megahertz of WCS spectrum – comprised of the paired A and B Blocks – are suitable and available for the provision of mobile telephony/broadband services and should therefore be added to the spectrum screen. Further, AT&T has indicated that it will take substantial steps to deploy LTE in the band (including through the acquisition of the spectrum at issue in these transactions).”

The FCC also declined to include additional 2.5 GHz spectrum of the type held by Clearwire and, by extension, Sprint Nextel:  “We find that [AT&T and the licensees of the WCS spectrum AT&T sought to acquire] have provided no new arguments that persuade us to change” the agency’s prior determination that including additional 2.5 GHz was not warranted, “particularly given that we do not yet have the benefit of a full record in the Mobile Spectrum Holdings Notice of Proposed Rulemaking.”

The FCC also rejected AT&T’s call for changing the screen only through an industry-wide rulemaking as opposed to the case-by-case approach the FCC followed in yesterday’s decision.  While the FCC noted AT&T’s argument for an industry-wide re-evaluation of the agency’s approach, the FCC said it would “continue to apply [its] current case-by-case approach to evaluate mobile spectrum holdings in secondary market transactions and initial spectrum licensing after auctions” while the Mobile Spectrum Holdings NPRM remains pending. 

If the FCC moves quickly to finalizes alternative spectrum concentration rules in the Mobile Spectrum Holdings NPRM, the increased headroom for wireless mergers and acquisitions adopted yesterday could prove fleeting.