Promoting Competition, Curtailing Excessive Market Power Benefits of Robust Competition

• Competition in the wireless broadband marketplace – Supports multiple, facilities-based networks for improved redundancy and reliability – Promotes rivalry on coverage, pricing, and service – Encourages innovative services, terms, and applications – Increases likelihood of successful, cost-effective public-private partnerships • Competition in wireless broadband spectrum auctions – Moves available spectrum to its highest valued use – Increases auction participation and potential revenue for public interest goals, including FirstNet

2 High Spectrum Resource Concentration

The nation’s two largest 60 wireless carriers have * acquired vast amounts of “beachfront” 50 spectrum below 1 GHz while largely avoiding 40 competitive scrutiny

30

20

10 *

0 Verizon Wireless AT&T Sprint T-Mobile/MetroPCS US Cellular

Source: Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993; Annual Report and Analysis of Competitive Mobile Conditions with Respect to Commercial Mobile Services, Sixteenth Report, WT Docket No. 11-186, ¶ 118 (rel. Mar. 21, 2013); Verizon and T-Mobile Assignment Applications, ULS File Nos. 0006090675, 0006090661 (filed Jan. 10, 2014). * The hashed boxes reflect T-Mobile’s pending acquisition of certain Lower 700 MHz A Block spectrum licenses from Verizon Wireless.

3 High Subscriber and Revenue Concentration

Percentage of Wireless Industry Revenues* • In 2001, AT&T and Verizon 100 controlled 43% of all U.S. 80 wireless subscriptions 60 • Today these companies control 66% of all wireless 40 subscriptions and 70% of 20 the lucrative post-paid 0 market Verizon + AT&T Everyone Else

Source: Comments of Free Press, WT Docket No. 12-269 (filed Nov. 28, Source: Letter from Rebecca Thompson, General Counsel, CCA, et 2012), at 5 (citing Petition to Deny of Free Press, In the Matter of al., to Acting Chairwoman Mignon Clyburn et al., Docket No. WT Applications of AT&T, Inc. and Deutsche Telekom AG For Consent to 12-269 (May 20, 2013) at 2. “Revenue” is used here to refer to Assign or Transfer Control of Licenses and Authorizations, WT Docket Earnings Before Interest, Taxes, Depreciation and Amortization No. 11-65 (May 31, 2011), at Figure 2 and SNL Kagan Wireless Industry (EBITDA). Benchmarks).

4 High Relative Book Values

Spectrum book value as reported to SEC, in • Spectrum aggregation billions has allowed the 90 dominant firms to 80 maintain and increase 70 their market power 60

50 • The top 2 carriers 40 account for 4/5 of the

30 industry’s profits, and 20 10 this share has 0 increased over the past 3 years while all other carriers’ shares have declined

Source: Verizon Communications Inc., Annual Report (Form 10-K), Exhibit 13 at 67 (Feb. 26, 2013); AT&T Inc., Source: Comments of Free Press, WT Docket No. 12- Annual Report (Form 10-K), Exhibit 13, at 36 (Feb. 22, 2013); Sprint Nextel Corp., Annual Report (Form 10-K), 269 (filed Nov. 28, 2012), at 7 (citing SNL Kagan at F-19 (Feb. 28, 2013); T-Mobile USA, “T-Mobile USA Reports Fourth Quarter 2012 Financial Results,” Press Wireless Financials 2008-2011). Release, at 8 (Feb. 28, 2013); MetroPCS Communications, Inc., Annual Report (Form 10-K), at F-2 (March 1, 2013); United States Cellular Corp., Annual Report (Form 10-K), Exhibit 13, at 31 (Feb. 27, 2013).

5 Market Structure and Concentration

• Competitors’ acquisition of low-frequency spectrum holdings threatens the dominant incumbents’ market power o Low frequency spectrum has high “foreclosure value” to the two dominant operators separate from the true economic value of building and operating a network o The current level of market concentration increases the ability and incentive for predation by dominant incumbents to deter market entry and decreases the chances that competitive carriers will win low-frequency spectrum auctions o Reduced competition not only allows the dominant incumbents to retain and expand their market power, but also may allow them to win auctioned licenses at very low prices • Promoting a diversity of wireless spectrum holdings now can enhance auction revenue and represents a superior alternative to dominant carrier regulation later

6 Benefits of Competition

• Robust competition will diminish and may end unless competitive carriers have a fair opportunity to access low- frequency spectrum resources. • Adopting a no-nonsense, ex ante spectrum aggregation limit: o mitigates the risk of predation to deter market entry; o increases auction participation; o creates the potential for higher auction revenue; o promotes investment and innovation; o protects FirstNet funding; o enhances consumer choice; o drives growth in a critical sector of the U.S. economy; and o heightens clarity, certainty and predictability for all carriers.

7 Low-Band Spectrum is Uniquely Valuable

• Low-band spectrum delivers un-matched in- building penetration. • Low-band spectrum reduces a carrier’s cost to compete because it requires less equipment to cover the same geography. • Low-band spectrum expands coverage, especially to areas with lower population densities, challenging terrain, or other barriers to deployment.

8 The Two Largest Carriers Agree

• AT&T Chairman and CEO Randall Stephenson: “[O]ne of the beauties” of 700 MHz spectrum is that “it propagates like a bandit. It takes fewer cell sites to get a good quality signal, both voice and data to you.” • Verizon Communications CFO Fran Shammo: “All spectrum is not created equal for all carriers. So from our holding perspective, with the 700 contiguous megahertz spectrum that we have, that spectrum is extremely efficient. The propagation of that spectrum into buildings is very high, so you don’t need as much…cell splitting or build out that you would need from other types of spectrum. So from a 700 megahertz it’s really efficient spectrum.”

9 Maximizing Two-Way Broadband Spectrum

T-Mobile / Verizon Joint Band Plan + AT&T* + Sprint**

Flex / G 37 Downlink (35 MHz) Duplex Uplink (35 MHz) TV B

AT&T Band Plan + Sprint**

Supp. G Supp. DL (20 37 Downlink (25 MHz) Duplex Uplink (25 MHz) DL / TV B MHz)

Ericsson Band Plan + Sprint**

UL-2 G Downlink-2 (20 37 Downlink (25 MHz) Duplex Uplink (25 MHz) B (20 MHz) MHz)

* AT&T has endorsed the T-Mobile/Verizon Joint Band Plan where 84 MHz or more spectrum is cleared.

** While Sprint continues to support TDD, Sprint has endorsed tailoring the FDD band plan to the amount of spectrum cleared. If an FDD configuration is adopted, Sprint recommends a band plan generally based on the Ericsson plan if 120 MHz is cleared; a band plan generally based on the T-Mobile/Verizon Joint Band Plan if 84 MHz is cleared; and a band plan generally based on the AT&T 25x25 MHz Band Plan if less than 84 MHz is cleared.

10 Interoperability

• Interoperability helps prevent the two dominant carriers from impeding or blocking competitors’ access to end user devices and network equipment.

• At its most basic, an interoperability rule should require: – every licensee that transmits on any paired 600 MHz transmit frequencies to be capable of transmitting on all paired 600 MHz band transmit frequencies; and – every licensee that receives on any paired 600 MHz receive frequencies to be capable of receiving on all paired 600 MHz receive frequencies.

11 Package Bidding

• The incentive auction will use a clock auction format in which the prices are incrementally increased at each round and the bidders indicate the number of spectrum blocks in each area they wish to buy at the announced prices. • In this context, package bidding creates a number of potential problems, including excess supply – licenses that previously would have sold at a given price will have no buyer at that price if the package bidder withdraws. • Excess supply raises numerous complex questions, including: – How the auction administrator “resets the clock” on pricing; – How the reset pricing clock affects eligibility to place additional bids and the degree to which it requires bidders to keep previously losing bids active; and – How to overcome the free rider information problem individual bidders face without encouraging collusion among them. • The record contains no guidance on whether these and related questions, which are among the most challenging of all auction design issues, can be resolved in the incentive auction context.

12 Estimated Auction Proceeds

Spectrum Block Estimated Proceeds Price per MHz-POP (4Q2013) (Est.) H Block $1.6-$2.3 billion $0.50-$0.75 1915-1920 MHz/ 1995-2000 MHz AWS-3 $6.3-$9.4 billion $0.80-$1.20 [1755-1780]1/ 2155-2180 MHz 1695 Band ≥$1 billion unpaired; ≥$0.21 if unpaired; 1695-1710/[unspecified 15 MHz $2.3-$4.7 billion paired $0.50-$1.00 if paired in the Spectrum Act] Total (without 600 MHz) $8.9-$16.4 billion -- 1 Proceeds from the auction of this spectrum do not go to the Public Safety Trust Fund and so are excluded from these calculations.

Source: Presentation of T-Mobile US to the Federal Communications Commission (Jan. 13, 2014), attached to Letter from Trey Hanbury, counsel to T-Mobile USA, to Marlene Dortch, Secretary, Federal Communications Commission, WT Docket Nos. 12-269, 12-268 (filed Jan. 15, 2014), available at http://apps.fcc.gov/ecfs/comment/view?id=6017583517.

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