AT&T mega-merger tied to spectrum drought: Cicconi

By Jasmin Melvin

WASHINGTON (Reuters) – U.S. government remedies to free up more U.S. airwaves for wireless services are not coming fast enough and were an important driver behind AT&T Inc’s (T.N: Quote, Profile, Research) $39 billion bid to buy Deutsche Telekom AG’s (DTEGn.DE: Quote, Profile, Research) T-Mobile USA, an AT&T executive said on Wednesday.

James Cicconi, the head of AT&T’s lobbying effort to acquire T-Mobile, said the merger creates a fast and certain solution to AT&T’s impending spectrum shortage.

“We’re deploying additional spectrum as quickly as we can, but you hit exhaust rates very fast,” Cicconi said during a panel discussion on spectrum at the Brookings Institution.

AT&T estimates it will carry the equivalent of the volume of all the mobile traffic it handled last year in just the first six or seven weeks of 2015, as the explosive demand for wireless devices such as Apple Inc’s (AAPL.O: Quote, Profile, Research) iPhone continues.

A spectrum shortage would mean clogged networks, more dropped calls and slower connection speeds for wireless customers.

“This merger will more quickly create the spectrum efficiencies that we need to sustain demand and it will free up more spectrum well in advance of the reallocation of spectrum that the government is working on,” said Cicconi, senior executive vice president of external and legislative affairs for AT&T.

The U.S. government has been hunting for underused airwaves to make 500 megahertz of spectrum available over the next 10 years for wireless services.

Some 2,200 megahertz of spectrum with the potential for wireless broadband use has been identified, but evaluating the airwaves and providing current holders time to relocate their operations will take some time.

The FCC hopes to “repurpose” 120 megahertz of spectrum through incentive auctions where television broadcasters would voluntarily give up spectrum in exchange for a portion of the auction proceeds.

But the agency needs Congress to grant it the authority to hold such auctions and divert some of the proceeds from the U.S. Treasury.

Broadcasters have raised concerns about giving up their airwaves and have considerable support among lawmakers because of local television coverage of home-town politics.

“The current recalcitrance by broadcasters will have to give way to economic logic,” Cicconi said, comparing the over-the-air broadcast industry to the pager industry that saw its spectrum reallocated to better uses.

Cicconi added that budget deficit demands are likely to weigh more heavily on lawmakers as time goes by, which could shrink the share of proceeds that go to broadcasters when auctions do occur, suggesting to broadcasters that they should jump on board sooner than later.

“We would all welcome the broadcasters actually deciding to be constructive in this debate,” Cicconi said. “If they’ve got a better idea, they need to put it on the table.”

The National Association of Broadcasters (NAB) said they would only oppose the auctions if they appeared to harm broadcasters who opt not to part with spectrum or seemed to harm viewers. They were not against a truly voluntary auction.

Some 43 million Americans rely exclusively on over-the-air television, Dennis Wharton, the group’s executive vice president of communications, said on Wednesday.

NAB also questioned the existence of a nationwide spectrum shortage.

“If there is a spectrum crunch, it exists in only a few metropolitan areas. One has to ask why free TV should be compromised in Bend, Oregon, just to accommodate a faster download app in Los Angeles,” Wharton said.

(Reporting by Jasmin Melvin; editing by Andre Grenon)

AT&T mega-merger tied to spectrum drought: Cicconi