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Sorry, That Competing Online Video/Cord-Cutter Competitor is Dead in the Water When Usage Caps Arrive

Phillip "It isn't so dumb to own the pipes" Dampier

Phillip “It isn’t so dumb to own the pipes” Dampier

In 2006, AT&T CEO Ed Whitacre thought his company was at a disadvantage being stuck with “dumb pipes” while Google, Yahoo! (remember them?) and Vonage couldn’t count their earnings fast enough. While AT&T sold consumers plain DSL service, content was king on Wall Street and Whitacre groused it was unfair for bandwidth hogs to use “the pipes for free.” That one statement was the equivalent of throwing a lit match on a hillside in Malibu Canyon and a predictable firestorm over Net Neutrality ensued.

Nine years later, Net Neutrality is now official FCC policy, although the sour grape-eating Republicans will continue to throw Congressional hissyfits along the way. While they rely on tissue-thin evidence to back their assertion the FCC secretly colluded with the Obama Administration to stick it to AT&T and demand its repeal, the future of Net Neutrality will more likely be decided in a courtroom a year or two from now.

Back in 2006 AT&T primarily sold DSL service and was looking for cash to finance its then emerging U-verse platform. AT&T planned to follow cable’s lead, devoting most of the available bandwidth on its fiber to the neighborhood network to cable television programming. Broadband speeds were limited to just under 25Mbps — even less if a large household had multiple television sets in use.

But as the Great Recession arrived and wages stagnated, the cost of what used to be a “must-have” service for most Americans increasingly began to exceed the household budget and the day finally arrived when cable companies started losing more television customers than they were adding. Even worse, cable programming costs continue to spiral upwards and no major cable company can increase cable television rates fast enough to support the usual profit margin the industry counted on.

What Whitacre failed to realize nine years earlier is that broadband providers did not simply own “dumb pipes.” AT&T, Comcast, Verizon, Time Warner Cable, Charter and other providers actually occupy two gilded catbird seats, with AT&T and Verizon dominating the wireless Internet business and Comcast, Time Warner, and Charter dominating at-home viewing and wired broadband. Lawmakers who deregulated both industries predicted pitting AT&T against Comcast or Verizon against Time Warner Cable would create competition not seen since Coke vs. Pepsi. Consumers would benefit and world-class service would result.

Instead, Time Warner Cable now sells Verizon Wireless phone service. Verizon gave up on expanding its FiOS network and is selling off its DSL and FiOS business in pieces to focus on its best moneymaker, Verizon Wireless. Comcast in turn threw in the towel on any notion of offering competing cellular service and, in fact, sold its acquired wireless spectrum to Verizon.

PlayStation Vue's lineup

PlayStation Vue’s lineup

The best way to make money is to avoid price wars with your competitors and the evidence shows there is growing peace in America’s Telecom Valley. Comcast can now raise your broadband bill because, for most, Verizon FiOS isn’t an option. AT&T U-verse does not have to hurry speed upgrades to customers if Time Warner Cable delivers no better than 50/5Mbps service in large parts of its service area. Google Fiber remains a minor threat, only available in a handful of cities. AT&T distributed more copies of its press release touting U-verse Gigapower — its gigabit Internet offering — than there are customers qualified to sign up.

Notice that we’ve drifted away from talking about cable television programming. So has the industry, now increasingly dependent on broadband rate increases to make up the difference in revenue they used to take home from their television packages.

But now that the biggest players have a predictable source of revenue, allowing disruptors to further challenge earnings isn’t something your local cable and phone company will allow for long. At the moment, those most likely to cause problems are the growing number of “over the top” streaming video services that do not require a cable television subscription to watch. But they do need broadband — Whitacre’s “dumb pipes” — to reach subscribers. To manage that, services like Apple, PlayStation Vue and Sling TV and their customers must deal with the gatekeepers — AT&T, Comcast, Time Warner Cable, Verizon and others.

What Whitacre thought was a disadvantage is now becoming the best thing in the world — manning a toll booth on the only two roads most Americans can use to access online content.

Today, Sony officially launched its Internet-TV service, “PlayStation Vue” in three cities (New York, Chicago and Philadelphia) with a base price of $49.99/month. In includes more than 50 cable networks and in the three launch cities — local network affiliates. In Chicago and Philadelphia, where Comcast provides cable service, potential customers will need to pay $50 a month for Vue and another $64.95 a month for 50Mbps broadband — the least expensive broadband-only tier that is suitable for high quality viewing. Your combined bill for both services is $114.94 a month. Comcast charges $99.99 a month for its double play – 220 TV channels and 50Mbps broadband — almost $15 a month less for its package, and it includes around 150 more channels than Vue.

Comcast explans its new usage caps.

Comcast explains its new usage caps.

But Comcast also has another weapon it is testing is several of its markets — the resumption of usage caps and overlimit fees on its broadband service. Comcast customers in most test markets are given 300GB a month, after which they face overlimit fees of $10 for each additional increment of 50GB. While web browsing and e-mail fit more than comfortably within those caps, watching HD video may not. That leaves a potential Vue customer with a major dilemma. Should they pay $15 a month more for service than they can pay Comcast for a better package -and- chew away their usage allowance using it?

Comcast has yet to figure out how to install a coin collector on top of your television set, so you can watch as much Comcast cable television as you’d like. But watching streaming video could get very expensive if it exceeds a future Comcast usage allowance.

Smaller video packages from providers like Sling TV or the forthcoming Apple streaming service might make more sense, but will still be subject to Comcast’s usage caps if/when they are reintroduced around the country, while Comcast’s own television service will not.

This is why cable and phone companies hold enormous power over their potential competitors, even if Net Neutrality is fiercely enforced. Usage caps and usage-based billing represent an end run around Net Neutrality and both are permitted. The FCC has consistently refused to engage on the issue of broadband usage caps, leaving providers with a useful weapon to deter customers from dropping their television package in favor of an online alternative.

With most Americans having a choice of only one or two “dumb pipes” over which they can reach these services, being an owner of those pipes and getting to set the rates and conditions to use them is a very comfortable (and profitable) place to be.

HissyFitWatch: Republicans Accuse the White House of Pressuring FCC on Net Neutrality

Wheeler at this morning's hearing.

Wheeler at this morning’s hearing.

Revenge-seeking Republicans spent more than two hours this morning grilling the chairman of the Federal Communications Commission, Thomas Wheeler, in the first of five Congressional hearings on the agency to be held over the next two weeks.

Rep. Jason Chaffetz (R-Utah), chairman of the House Oversight and Government Reform Committee, accused the FCC of a lack of transparency regarding the recent release of Net Neutrality rules that universally ban paid fast lanes and revenue-based traffic management. Republicans accused the Obama Administration of secretly pressuring Wheeler to adopt strong Open Internet protections.

“The lack of transparency surrounding the open Internet rule-making process raises a lot of questions,” said Chaffetz.

Chaffetz, most of his Republican colleagues, and many large telecom companies object to the Net Neutrality rules and suggest Wheeler’s rumored original lighter-touch “hybrid approach” was swamped by White House objections and replaced with a much stronger Open Internet policy framed around Title II reclassification of broadband as a telecommunications service at the urging of the administration.

Chaffetz dismissed comments from four million Americans writing the FCC in favor of Net Neutrality claiming the writers did not recommend Title II reclassification of broadband, despite the fact many suggested exactly that.

To bolster Republican arguments that President Obama exercised undue influence on an independent agency, Chaffetz’s committee selectively released portions of now-unredacted email exchanges between Wheeler, agency officials, Congress, and the White House. It also included a partial e-mail exchange involving AT&T’s top lobbyist, Jim Cicconi, who is evidently on a first-name basis with some of the FCC’s highest officials, including Wheeler’s senior counselor, Philip Verveer.

In response to a November 10 news release featuring comments from FCC chairman Wheeler in response to President Barack Obama’s statements of support for strong Net Neutrality, Cicconi sent a concerned email to Wheeler’s office the Republicans chose not to disclose. But they did include Verveer’s response:

Jim,

We’re trying to schedule a conversation about this morning’s developments for some time this afternoon. I hope we’re able to connect.

Phil

In response to that, Cicconi fired off this quick response from his iPad:

I hope so too.

Now I at least understand why you pushed the hybrid.

This is awful. And bad for any semblance of agency independence too.

Too many people saw Zients going in to meet with Tom last week.

verveer

Cicconi is referring to Jeff Zients, a White House economic adviser, who met with Wheeler on Nov. 6. In Cicconi’s mind, and by extension the Republicans at today’s House hearing, that meeting represented “undue pressure from the White House.”

Republicans also attempted to prove the FCC and the White House closely collaborated on a rollout of Net Neutrality using an email from an irritated Wheeler to his senior staff shortly after his driveway was blocked by Net Neutrality activists:

FYI, Isn’t it interesting:

  1. The day of the demonstration just happens to be the day folks take action at my house.
  2. The video of [President Obama] just happens to end up on the same message as the video from [the president].
  3. The White House sends this email to their supporter list asking “pass this on to anyone who cares about saving the Internet.”

Hmmm….

wheeler demo

chaffetz

Chaffetz

But Wheeler’s message suggests he was never aware of the White House’s campaign to bolster Net Neutrality, much less a part of it.

A third email from then Sen. Majority Leader Harry Reid’s office revealed the senator was no fan of Title II reclassification of broadband to protect Net Neutrality. David Krone, Reid’s chief of staff, lectured Wheeler about keeping strong Net Neutrality off the table because it creates “problems for us.”

In May 2014, chairman Wheeler announced his plans for a hybrid approach to Net Neutrality that would likely combine bans on censorship with permission for Internet providers to set up paid fast lanes for content producers like Netflix.

Initial media reports of Wheeler’s intentions sparked a major backlash against the proposal among Net Neutrality advocates.

In a May 15, 2014 email exchange with Wheeler, Krone attempted to buck up Wheeler and his “third way” Net Neutrality plan once in the morning before it was announced and later that evening after the proposal took heavy fire in the press.

9:26 am (Krone to Wheeler)

Good luck today.

Not sure how things have landed but I trust you to make it work. Please shout if you need anything.

Spoke again with the [White House] and told them to back off Title II. Went through once again the problems it creates for us.

6:15pm (Krone to Wheeler)

Too funny. I literally just watched your remarks from this morning. Spot on. Thank you!!!

P.S. Zients was definitely reacting to press reports. Or, should I say, overreacting. My main point to the [White House] is how can you declare today that regulations written in the 1930’s will work fine for 2014 technology. Let Tom do his job and this will be fine.

reid

Another email exchange between Wheeler and John Podesta, counselor to the president, referenced a New York Times story that signaled Wheeler was backpedaling on Net Neutrality, a story later proven inaccurate.

podesta

At this morning’s hearing, Wheeler pushed back against the Republican accusations.

“There were no secret instructions from the White House,” Wheeler said. “I did not, as CEO of an independent agency, feel obligated to follow the president’s recommendation.”

C-SPAN carried this morning’s hearing with FCC chairman Thomas Wheeler appearing before the House Oversight and Government Reform Committee. (2 hours, 41 minutes)

FCC Releases Final Net Neutrality Rules (and the Endless Republican Dissent)

Phillip Dampier March 12, 2015 Net Neutrality, Public Policy & Gov't No Comments

FCC-15-24A1

The Federal Communications Commission this morning released its final order detailing the agency’s official Net Neutrality rules intended to protect and preserve a free and open Internet.

The 400-page document includes footnoted, plain language explanations and arguments in favor of the new regulations as well as the rules of the road for Internet Service Providers, details about how to complain about alleged violators, and lengthy objections from the two Republican commissioners who oppose the new net policies.

Despite the exposition and dissent (and the Wall Street Journal editorial page calling the document a “blobfish,” the Net Neutrality rules and supplementary definitions are around 450 words long:

A person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not block lawful content, applications, services, or nonharmful devices, subject to reasonable network management.

A person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not impair or degrade lawful Internet traffic on the basis of Internet content, application, or service, or use of a non-harmful device, subject to reasonable network management.

A person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not engage in paid prioritization.

“Paid prioritization” refers to the management of a broadband provider’s network to directly or indirectly favor some traffic over other traffic, including through use of techniques such as traffic shaping, prioritization, resource reservation, or other forms of preferential traffic management, either (a) in exchange for consideration (monetary or otherwise) from a third party, or (b) to benefit an affiliated entity.

Any person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not unreasonably interfere with or unreasonably disadvantage (i) end users’ ability to select, access, and use broadband Internet access service or the lawful Internet content, applications, services, or devices of their choice, or (ii) edge providers’ ability to make lawful content, applications, services, or devices available to end users. Reasonable network management shall not be considered a violation of this rule.

A person engaged in the provision of broadband Internet access service shall publicly disclose accurate information regarding the network management practices, performance, and commercial terms of its broadband Internet access services sufficient for consumers to make informed choices regarding use of such services and for content, application, service, and device providers to develop, market, and maintain Internet offerings.

A mass-market retail service by wire or radio that provides the capability to transmit data to and receive data from all or substantially all Internet endpoints, including any capabilities that are incidental to and enable the operation of the communications service, but excluding dial-up Internet access service. This term also encompasses any service that the Commission finds to be providing a functional equivalent of the service described in the previous sentence, or that is used to evade the protections set forth in this Part.

A network management practice is a practice that has a primarily technical network management justification, but does not include other business practices. A network management practice is reasonable if it is primarily used for and tailored to achieving a legitimate network management purpose, taking into account the particular network architecture and technology of the broadband Internet access service.

In brief, the new rules forbid providers from fiddling with your Internet traffic for the purposes of speeding up their preferred partners while slowing down everyone else for economic motivations. It does allow providers to engage in reasonable “network management” as long as those management techniques apply equally to all content of a specific type. For instance, Comcast cannot slow down Netflix while speeding up its own affiliated online streaming services.

FCC Releases Final Net Neutrality Rules and Debunks Industry Critics in Fact/Fiction News Release

Phillip Dampier March 12, 2015 Net Neutrality, Public Policy & Gov't 1 Comment

As part of the Federal Communications Commission’s release of final Net Neutrality regulations, the FCC included this “Fact/Fiction” news release intending to debunk industry (and political) opposition to Net Neutrality.

fccThe Open Internet Order: Preserving and Protecting the Internet for All Americans

The Commission has released the full and final text of the Open Internet Order, which will preserve and protect the Internet as a platform for innovation, expression and economic growth. An Open Internet means consumers can go where they want, when they want. It means innovators can develop products and services without asking for permission. It means consumers will demand more and better broadband as they enjoy new Internet services, applications and content.

Protecting Consumers, Providing Certainty for Innovators and Investors
Before the Commission adopted this Order, there were no rules preventing broadband providers from conduct that would threaten the Open Internet.  This Order implements bright line rules to ban blocking, throttling and paid prioritization (or “fast lanes”) and, for the first time, the rules fully apply to mobile.

Open Internet rules are grounded in the strongest possible legal foundation by relying on multiple sources of authority, including Title II of the Communications Act and Section 706 of the Telecommunications Act of 1996. However, as part of this Order, the Commission refrains (or “forbears”) from enforcing provisions of Title II that are not relevant to modern broadband service.  Together, Title II and Section 706 support clear rules of the road, providing the certainty needed by innovators and investors, and the competitive choices and freedom demanded by consumers.

Separating Fact from Fiction
The Order uses every tool in the Commission’s toolbox to make sure the Internet stays fair, fast and open for all Americans, while ensuring investment and innovation can flourish. We encourage the public to read the Order, which reflects the input of millions of Americans and allows everyone to separate myths from fact, such as:

Myth: This is utility-style regulation.

Fact: The Order takes a modernized approach to Title II, tailored for the 21st Century

There is no “utility-style” regulation. The Order bars the kinds of tariffing, rate regulation, unbundling requirements and administrative burdens that are the hallmarks of traditional utility regulation. No broadband provider will need to get the FCC’s approval before offering any price, product or plan. (paragraphs 37-38, 417, 451-452, 497-505)

Myth: The FCC plans to set broadband rates and regulate retail prices in response to consumer complaints.

Fact: The Order doesn’t regulate retail broadband rates.

Old-style telephone regulation required companies to file tariffs with the FCC and await regulatory review before they could bring new products to markets – such an approval process does not exist and is not permitted under this Order. Broadband providers will be able to adjust retail rates without Commission approval and without having to wait even a minute. (paragraphs 37, 451-452, 497-505)

Much has been made of the Section 201(b) authority in Title II under which the Commission may hear complaints and respond to conduct that violates our Open Internet rules. The claim is made that it will be a back-door form of rate regulation. This exact same authority has existed for wireless voice service since 1993 and has never produced rate regulation. (paragraphs 38, 409-410, 421-423)

Myth: This will increase consumers’ broadband bills and/or raise taxes.

Fact: The Order doesn’t impose new taxes or fees or otherwise increase prices.

Nothing in the Order imposes or authorizes new taxes or fees.  In fact, the Internet Tax Freedom Act currently bans state and local taxes on broadband access regardless of how the FCC classifies it.  With respect to Universal Service, the Order does not impose mandatory contribution assessments, but simply allows a current, separate proceeding on how to reform universal service contributions to proceed.  (paragraphs 37, 57-58, 430-433, 488-491)

Myth: This is a plan to regulate the Internet and let the government take over the Internet.

Fact: The Order doesn’t regulate Internet content, applications or services or how the Internet operates, its routing or its addressing.

The Order does not regulate the Internet. It applies to broadband providers – the companies that connect people’s homes to the public Internet.  In other words, the Order protects consumers’ and innovators’ “last-mile” access to what’s on the Internet—the applications, content or services that ride on it and the devices that attach to it.  It means consumers can go where they want, when they want and it means innovators can develop products and services without asking for permission.  (paragraphs 25-26, 186-193,336-340,382)

Myth: This proposal means the FCC will get to decide which service plan you can choose.

Fact: The Order doesn’t limit consumers’ choices or ban broadband data plans.

There is no approval requirement before retail plans, prices or services can be offered to consumers. Broadband providers will continue to be able to offer new competitive services and rates. This means that when a broadband provider wants to add a faster tier of service at a new price, for instance, it is free to do so. Similarly, a broadband provider is free to change pricing without approval. What providers can’t do is engage in behavior that threatens the Open Internet. (paragraphs 139, 144, 151-153)

Myth: This will embolden authoritarian states to tighten their grip on the Internet.

Fact: The Open Internet rules ensure the Internet continues to be a powerful platform for free expression, innovation and economic growth.

This Order does not regulate the operation of the Internet nor does it endorse governmental control of the way people use the Internet. This Order is a strong statement that no one – government or corporation – should interfere with the user’s right of free and open access to the Internet.  In order to encourage other governments to establish policies to protect the free exchange of ideas on an open, unrestricted Internet, we must first protect those values at home.  (paragraphs 76-77)

Myth: This will stifle innovation in new areas of Internet connectivity like connected cars or tele-health.

Fact: The Order doesn’t regulate the class of IP-based services that do not connect to the public Internet.

The Order does not regulate data services that do not go over the public Internet —sometimes called “specialized services” or “managed services” and described in the Order as “non-BIAS (Broadband Internet Access Service) services”. Consumers who buy these services don’t get, and don’t expect to get, access to all points on the Internet. Examples can include: VoIP from a cable system, VoLTE from a mobile operator, a dedicated heart-monitoring service, e-readers, connected cars, and other innovative data services we cannot imagine today. (paragraphs 35, 207-213)

Myth: This will lead to slower broadband speeds and reduced investment in broadband deployment.

Fact: The Order doesn’t reduce broadband investment or slow broadband speeds.

More openness leads to more consumer demand for more and better broadband. It’s that simple. No price regulation means consumer revenues for ISPs should be the same the day after the Order takes effect as they were the day before. It is these revenues that provide the stimulus for investment. History proves that investment will not be affected. For instance, in addition to the $270 billion invested in wireless voice service in the years in which it was the prime driver of mobile traffic (through 2009), wireline DSL was regulated as a common-carrier service until 2005—including a period in the late ‘90s and early 2000’s that saw the highest levels of wireline broadband infrastructure investment ever. (paragraphs 39, 412-414, 421-425)

More recently, Verizon spent $4.74 billion in 2008 for licenses to C-block spectrum governed by FCC open access regulations and since then has invested tens of billions of dollars deploying mobile services.  And just this year, Sprint, T-Mobile, Google Fiber, Frontier Communications, COMPTEL and NTCA—The Rural Broadband Association have all said that applying Title II to broadband services won’t harm investment.  Finally, the recent AWS auction, conducted under the prospect of Title II regulation, generated bids (net of bidding credits) of more than $41 billion—further demonstrating that robust investment is not inconsistent with a modern, light-touch Title II regime. (paragraphs 339-40, 416, 423)

Myth: The new transparency rules add up to a new form of regulation.

Fact: Clear disclosure requirements benefit both consumers and industry.

The enhanced transparency requirements, which build on the existing transparency rule, will do a better job of ensuring that consumers know the price and performance of their Internet connections. They also benefit broadband providers and Internet content, application, and service providers by removing unnecessary uncertainties that affect the quality of their services.  That’s not regulation, that’s efficient common-sense consumer protection. (paragraphs 23-24, 154-185)

Myth:  The general conduct standard will chill innovation.

Fact: This is not new ground.  The Commission also adopted a general conduct standard in 2010 and investment flourished.

There has always been a “just and reasonable” standard for telecommunications services – and investment has flourished. Since 2005, the Commission has made plain its intent to take action to preserve the Open Internet – and broadband services and investment have continued grow. Of specific significance, the 2010 Open Internet Order applied such a general conduct standard that was in force until 2014. In the three years that the 2010 Open Internet rules were in effect, broadband capital expenditures increased from $64 billion in 2009 to $75 billion in 2013. The standard adopted in the Order is tailored to the open Internet harms the Commission has identified.  It focuses on whether the broadband provider is using its gatekeeper status in ways that unreasonably affect consumers’ and edge providers’ ability to use the Internet to communicate with each other.  (paragraphs 2-4, 20-22, 133-153)

Verizon Wireless Admits Spectrum Isn’t The Holy Grail; There Is No Wireless Spectrum Shortage

A Verizon executive told investors there is no wireless spectrum shortage in the United States and Verizon has historically purchased and warehoused spectrum it had no intention of using immediately.

Fran Shammo, chief financial officer of Verizon Communications, drew attention to Verizon’s controversial spectrum acquisition policy as part of a conversation with investors about the recent FCC auction that sold 65 megahertz of wireless frequencies for an unprecedented $44.9 billion, far and away the highest ever seen in a spectrum auction.

“In every purchase of spectrum up to this auction, the scale was that it was more efficient to buy spectrum than it was to build capacity because the scale was spectrum was cheaper to build on capacity,” Shammo said.

preauction

Before the auction, there were significant differences in Verizon Wireless’ network capacity in different cities. In New York City, Verizon controls 127MHz. In Los Angeles and San Francisco it manages with 107MHz, but only has 97MHz to work with in Philadelphia, San Diego and Chicago.

Verizon Wireless has always held spectrum it acquired at auction but never put into widespread use on its network. But bidding during the FCC’s most recent Auction 97 made bidding and warehousing unused frequencies an expensive proposition, more expensive than beefing up Verizon’s existing network with additional cell towers, microcells, and other technology to make the most use of existing spectrum assets.

“This auction flipped [our acquisition] equation in certain markets,” Shammo said in reference to Verizon’s bidding strategy. “And so we became much more diligent on what markets we strategically wanted and [which] we were willing to let go because when you looked at it, if I was to get what I wanted initially when I went in, I would have spent an extra $6 billion when I could create the same capacity with $1.5 billion by building it.”

In the most recent auction, Verizon Wireless considered spectrum acquisitions crucial in California, where it added frequencies in Los Angeles, San Diego and San Francisco. But Verizon gave up bidding on spectrum for densely populated New York and Boston where the asking price grew too high. That forces Verizon Wireless to increase the efficiency of its existing network in those cities. It will do so by deploying more cell towers to divide the traffic load, as well as adding microcells and other small-area solutions in high traffic urban areas.

Despite not getting everything it wanted, Verizon took the auction results in stride, claiming its network was fully capable of handling growing traffic loads even in areas where it failed to win new spectrum.

“People think that spectrum is the Holy Grail and if you don’t have enough spectrum, you can’t have the capacity,” Shammo said. “But actually that’s not true now because technology has changed so much. If you look at small cell technology, diversified antenna systems, and when you think [about] Chicago, if you walk down the street, you see small cells on lamp posts. So, the municipalities are starting to open up to that small cell technology.”

postauction

AT&T paid $18.2 billion for nearly 250 licenses, compared with $10.4 billion Verizon will spend on 181 licenses. The presence of Dish Networks in the bidding clearly irritated AT&T and Verizon, primarily because the satellite dish provider incorporated two “designated entities” — SNR Wireless LicenseCo and Northstar Wireless — as bidding partners, winning up to 25% off their bids as part of a “small business discount.” The two DEs won over $13 billion in licenses with $3 billion in savings.

AT&T accused Dish of circumventing auction activity rules and distorting the bidding.

“As a result, Dish the corporate entity won no licenses,” said Joan Marsh, AT&T’s vice president of federal regulatory matters. “The Dish DEs, who each enjoyed a 25% discount, won substantial allocations.”

Marsh complained Dish already controls around 81MHz of spectrum that remains unused for wireless telecom services.

Dish also made life difficult for large carriers who have learned to predict the likely bidding strategies of their competitors based on experience. Many were surprised Dish managed to both bid up prices and win a substantial percentage of spectrum, all for a wireless business it has yet to build.

T-Mobile was not happy either. CEO John Legere called the auction “a disaster for American wireless consumers.” T-Mobile suffered considerably in the auction, outspent by Dish & Friends 132 times for important wireless licenses.

“Three companies alone spent an insane $42 billion between them, grabbing a ridiculous 94 percent of the spectrum sold at this auction,” Legere wrote, referring to AT&T, Dish Network and Verizon Wireless. “This whole thing should scare the hell out of you and every other wireless consumer in the U.S., because there is another important auction next year, and the results have to be different if wireless competition is going to survive.”

With the auction over, Verizon Wireless will continue to shift its spectrum usage around to accommodate network changes. Verizon will continue to emphasize enlarging 4G LTE services while gradually reducing the percentage of its network used for other purposes. Verizon expects to shut off its CDMA voice network in the early 2020s and is reducing the amount of spectrum dedicated to supporting its legacy 3G network.

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