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FCC chairman defends decision to squash AT&T/T-Mobile deal

Chairman Julius Genachowski touts spectrum sharing and small cells as ways to get around the looming constraints in the industry.

FCC Chairman Julius Genachowski addresses the CTIA 2012 audience here in New Orleans. Marguerite Reardon/CNET

Last updated: 10:47 a.m. PT

NEW ORLEANS--The Federal Communications Commission's decision to block the merger between AT&T and T-Mobile isn't going to hurt the industry's spectrum position and is in line with the free-market principles promoting competition, Chairman Julius Genachowski said today in a defense of his agency's actions.

Genachowski delivered a keynote speech at the CTIA Wireless conference here, which unofficially kicked off yesterday. The FCC chairman led with platitudes to the CTIA and the wireless industry on issues such as the environment and the prevention of mobile-device theft before moving into the meat of his speech: addressing the core issue of spectrum needs.

Mobile services are on pace to exceed the carriers' capacity, Genachowski said, and the FCC is working hard to address the issue.

The government and the FCC have been under pressure by the wireless industry to free up more spectrum, which would add capacity and allow the carriers to offer improved service to their customers.

But the FCC's recent actions have drawn criticism that they have actually undermined its own goals. The agency squashed the deal between AT&T and T-Mobile USA, which would have given AT&T more resources to deploy its next-generation wireless service.

The chairman, however, said the deal represented a line that the FCC wouldn't cross. The agency believes the deal would have hurt competition and consumers. AT&T has said the lack of a merger has resulted in higher prices for consumers and job losses, as well as a spectrum crunch for the carrier.

"Some have argued that 'specific transaction' is somehow causing a shortage and causing a price change," Genachowski said. "But the overall amount of spectrum hasn't changed, except for the amount we've added to it."

AT&T took issue with Genachowski's assessment.

The need for more spectrum is an industry-wide issue and problem....The FCC was within its rights to withhold its approval [of the T-Mobile acquisition]. But it is incorrect when it denies the impact such decisions have on the price of wireless services.

Basic economics, and the law of supply and demand, apply to the wireless industry as to all others. In the case of wireless, without additional capacity, which would have been created by our transaction, prices rise.

The FCC is pushing forward with an auction, and plans to sell off additional spectrum within the next three years, he said.

In addition, Genachowski touted the opportunity of sharing spectrum between government agencies and commercial carriers, which could help free up spectrum that would otherwise be locked up by the government. He noted that the FCC is working with the National Telecommunications and Information Administration to test spectrum sharing, and noted that T-Mobile has filed an application to participate in the testing process. Likewise, he said small cells, or small sites that boost local signals, could also alleviate spectrum issues by bringing consumers closer to the physical cell sites.

The FCC, however, has also take other steps that some in the industry have deemed counter to its goals. It revoked LightSquared's waiver to operate a terrestrial 4G LTE network, which would have injected a startup wireless player into the industry and shaken things up. Most recently, the FCC has put Verizon Wireless' deal to acquire spectrum that has been unused by the cable industry under scrutiny. The FCC said it asked for an extension to the 180-day review window because it needed more time to look at documents that were filed late.

Genochowski will hopefully be able to move faster with the FCC back at full strength.The Senate yesterday confirmed Jessica Rosenworcel, a Democrat, and Ajit Pai, a Republican, to fill the two vacant seats on the five-member board.

"We can't seize the opportunity before us if we don't tackle the issue before us," he said.