Verizon landline customers reporting problems with their service in Pennsylvania may be soon targeted for Verizon’s wireless landline replacement — Voice Link — according to two sources sharing an internal memo with Broadband Reports.

The May 7 memo states that a significant number “selected customers” will be migrated off Verizon’s copper landline network to the Voice Link wireless service. One of the sources recognized the move as an end run around regulators:

“It has become painfully obvious to both our employees and customers that Verizon wishes to divest themselves of all regulated services,” says the source. “Abandoning our regulated wire line customers in favor of fixed point LTE may seem like a clever move but it violates “The Negroponte Principle” and will ultimately bump-up against the immutable laws of spectrum conservation physics.”

“It’s a shame that corporations like Verizon can build a FTTCS based wireless empire with regulatory subsidies provided by their wireline customers and then force them onto the unregulated wireless side,” argues the insider. “Questions of ethics and legality abound and perhaps regulatory over-sight is warranted here.”

Verizon may not get too much oversight from Pennsylvania regulators hoodwinked by the telecom company in the past.

Voice Link is a voice-only wireless home phone replacement that lacks certain calling features, Caller ID with Name for one, and requires the homeowner to provide power (and backup batteries in the event of a power failure). Customers are also dependent on quality reception from the nearest Verizon Wireless cell tower and that it remains in service during severe weather events or prolonged power outages.

Some of the customers likely targeted are still waiting for DSL broadband service from Verizon. If those customers are identified as Voice Link prospects, they will be waiting for broadband forever because Voice Link does not support data services and Verizon cannot supply DSL over a scrapped landline network.

Stop the Cap! has also learned today that the Federal Communications Commission has no problem with Verizon’s unilateral action to switch landline customers to wireless.

A FCC representative told our reader Anne, who is currently fighting Verizon over its plans to abandon landline service on the New Jersey Barrier Island, that they consider Voice Link a functionally equivalent landline service. In a response that could have come directly from Verizon customer service, the FCC helpfully describes the new service Anne already understands and does not want:

Q. What if Verizon is NOT replacing copper with fiber, but is going strictly to wireless?  There will be no landlines whatsoever.  Is that acceptable?

A. “Yes that is acceptable and it is called Verizon Voice Link.  It is a wireless device that plugs into the telephone lines in your home, allowing customers the ability to use their home telephone to make and receive calls.” — FCC Representative Number : TSR54

“This second FCC response, like the first one, ignores the issue, is unprofessional and is insulting,” says Anne. “Obviously, I already know what Voice Link is.”

Verizon Communications has big plans for its “miraculous” wireless home phone replacement which will soon find itself in rural homes across Verizon’s service area as part of a larger plan to dismantle rural America’s wired telephone network.

Just as company executives promised more than a year ago, Verizon wants to transition rural customers to fixed wireless phone service that could mean the end of wired broadband for millions of Verizon customers still using DSL.

Verizon senior vice president Tom Maguire told Communications Daily Voice Link is Verizon’s answer for customers it cannot easily transition to fiber optics. He is thrilled about the prospects of getting rid of deteriorating copper networks in favor of an inexpensive wireless alternative.

“I’m super jazzed about this because I think it will be good for everybody,” he said. “I think it’ll change a lot.”

For rural Verizon customers, the changes could be profound, dramatic, and not exactly a win-win scenario:

• No more wired phone service, which means medical monitoring, many home security systems, and inexpensive dial-up service that all rely on landline technology will be rendered unusable;
• No more unlimited use DSL service, no business broadband service, no credit card processing or other electronic business transactions that depend on a wired connection;
• No enforced quality of service standards, rate oversight, or guarantee of access to quality voice service;
• No prospect of advanced fiber optic FiOS services, including high bandwidth video and broadband.

Verizon is making it clear Fire Island and the New Jersey Barrier Island are just the first steps towards the retirement of copper, either in favor of fiber optics in high profit/low-cost areas or wireless in rural areas not worth upgrading.

Maguire claims Fire Island residents did not want the company to tear up yards or streets to replace its damaged copper wire network with newer technology like fiber. But Fire Island residents and administrators tell Stop the Cap! they were never asked. Instead, residents are being told Voice Link is likely their only option for traditional phone service on the western half of the island, and some customers are unhappy they will never get FiOS broadband upgrades Verizon says are financially untenable to provide.

Verizon has quietly tested Voice Link in Florida, giving customers the option of keeping their wired service or switching to the wireless alternative. But the test may have been stacked in Voice Link’s favor, as the choice was given to voice-only customers having chronic service problems with Verizon’s deteriorating copper wire network.

Going forward, many rural customers may not have a choice. For those who want Internet access, Verizon isn’t promising its wireless network is up to the task. Their suggested alternative?

Get a satellite dish.

Maguire acknowledged Voice Link customers won’t be able to fax or do certain activities, but he said the telco never pretended they would. Verizon won’t be offering data services with Voice Link, but if Fire Island customers want more options, they can potentially choose satellite, he said.

Maguire believes that customers living with a deteriorating copper landline network will gravitate quickly towards a wireless phone replacement.

Verizon arranged a blind test of Voice Link for 40,000 customers in another company’s territory with unbranded devices. When the copper wire network performed normally, customers preferred the quality of traditional landline service. But after it rained, the poorly maintained network made all the difference.

“The copper sounded like hell, it was noisy and static-y,” Maguire said.

Maguire did not say if Verizon blind tested whether customers preferred traditional landline service, Voice Link, or its fiber optic FiOS network.

Verizon hopes to begin introducing its Voice Link service in other markets as early as June.

CenturyLink’s massive nationwide broadband service outage on May 7 hurt Florida schools trying to administer online testing, small businesses in Nevada that were forced to close for the day, and frustrated nearly six million customers across both states and in Arkansas, Missouri, Louisiana, Texas, Kansas, Minnesota, Ohio, Wisconsin, Pennsylvania, Colorado, Washington, Virginia, Michigan, Montana, Oregon, Tennessee, and Illinois.

An unspecified router failure disrupted broadband service for up to eight hours, and it could not have come at a worse time for Lee County and Cape Charter Schools in Florida that had to postpone state-mandated tests that are completed by students online.

Dr. Lee Bush told WZVN when things like this happen it is not good for the students or area schools.

“There’s a window of time for these tests and there’s a short period of time left. It does affect us,” said Dr. Bush.

The Las Vegas Sun also found itself without Internet access for much of the day, which also brought the newspaper’s website down. Several area businesses that depend on the Internet decided to send workers home late in the morning after it became clear CenturyLink had no realistic expectation of when service would be restored.

The Clark County School District, which serves Las Vegas, also reported their broadband service was interrupted.

In Illinois, Michigan, and Wisconsin outages created a significant problem for farmers cut off from commodity trading markets during the morning hours.

“An early Tuesday morning in May is definitely not a good time to have a long-lasting service outage for agribusiness,” said Sam Haupmann, who advises small and medium-sized farms on telecommunications matters. “Connectivity is very important for the farm economy these days, and farmers can’t just switch to the cable company or a cell phone. There often is no cable company serving farms and cell phone service can be difficult in rural areas.”

Ed Perrine, the chief of operations of Network Tallahassee, a Florida provider, told the Tallahassee Democrat all of his operations went down in the outage, affecting at least 4,000 customers and the 600 to 700 businesses they serve on the Florida Panhandle alone.

Perrine is not too happy with early reports CenturyLink’s massive outage could have come as a result of botched routine maintenance right before the start of business on a weekday:

Perrine said he spoke with CenturyLink at 6 a.m. where they advised him the company was doing scheduled maintenance. At 7:35 a.m. they told him something had gone wrong during the maintenance and it was affecting customers in 13 states.

By 10:30 a.m., the company advised the outage had spread to 22 states.

Perrine said the company has not told him what is causing the outage, but said that just after 11 a.m., the company advised Perrine that they were in the process of restoring service.

The timing of the update is questionable according to Perrine, who said maintenance is normally scheduled on early Sunday morning so if something goes wrong businesses won’t be affected.

CenturyLink had no plans to issue automatic service credits to affected customers, but you can request a refund for a day of lost service by contacting CenturyLink by phone or e-mail.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WBBH Fort Myers CenturyLink Outage 5-7-13.mp4[/flv]

WBBH in Fort Myers explains how a nationwide CenturyLink Internet outage on May 7 hurt the local economy, affected area schools, and frustrated area businesses and residents. (2 minutes)

Are we being unnecessarily pessimistic and cynical when we oppose the likely nomination of Thomas Wheeler to replace Julius Genachowski as the chairman of the Federal Communications Commission?

Some of our colleagues in the consumer-focused public policy arena suspect we might be.

Stop the Cap! is very skeptical that appointing a former cable and wireless industry lobbyist with 30+ years of experience is the best choice for consumers at the FCC.

Our friend Harold Feld from Public Knowledge, which has announced cautious support for Wheeler’s appointment, has a more optimistic view about his potential:

I understand where my friends are coming from when they look at Wheeler’s resume and think “oh God, another Washington insider, why can’t we ever get a real progressive!” But I cannot agree with Senator Rockefeller’s statement that “a lobbyist, is a lobbyist,” or the view of some that the taint of industry clings insidiously forever and corrodes the soul. It’s been ten years since Wheeler left CTIA, longer than that since he left NTCA. Had he really been interested in advancing the agendas of these industries, he was in an excellent position to do so when he headed up the Obama transition team. He did not. Indeed, Susan Crawford and Kevin Werbach, long-time stalwarts of the public interest who worked for Wheeler on the transition team, have joined other public interest luminaries as Wheelers strongest public supporters. Had Wheeler been working behind the scenes in the transition to promote the incumbents, I expect Susan and Kevin would have known.

I also recognize that support from public interest friends is also not conclusive. But it should surely weigh in the evaluation of Wheeler as much as any blog post. And I recognize I’m also a “Washington insider” and as likely to be led astray by my personal friendships and the whole “Washington Bubble” culture as any other human being. That’s why I’m glad people in the community are asking the right questions and putting Wheeler on notice that, like any Chairman, he needs to prove himself as a champion of the public interest. We at PK have also made it clear we expect Wheeler to not just talk a good game, but to get his hands dirty and make tough decisions that will piss off incumbents. And when we disagree, as we expect we will, have no doubt we will make our displeasure known.

Harold specifically commented on our piece reviewing Wheeler’s personal blog, in which Wheeler fell all over himself praising AT&T’s chief lobbyist Jim Cicconi, and seemed resigned to approving a proposed AT&T/T-Mobile merger with some preconditions:

It is certainly true that behavioral conditions often fall short, are short lived, and that companies generally find ways to work around them (and the FCC’s track record for enforcement is pathetic). Indeed, we at PK made these arguments in the context of the AT&T/T-Mobile merger for why no set of merger remedies could adequately address the harms such a merger would cause. But there is a huge difference between my belief that Wheeler was wrong about the best strategy to advance the public interest and accepting that he was motivated by a covert desire to support consolidation and deregulation.

It is more than likely we will have to do business with Tom Wheeler, and we can certainly understand efforts to paint a more optimistic and hopeful picture of the likely new chairman. But we would be dishonest if we said we have high hopes Wheeler will think first about ordinary Americans before steering the country’s telecommunications future. We have learned from the past.

Remember Your History: Catering to Big Special Interests is Bipartisan

Having covered the telecommunications industry since the 1980s when Dr. John Malone of Tele-Communications, Inc., was the American consumers’ worst nightmare, confronting today’s increasingly consolidated and expensive telecommunications marketplace is a case of “Back to the Future.” The deregulation and industry consolidation abuses in the 1980s riled up both Republicans and Democrats — wherever constituents flooded offices with complaints about the local cable monopoly. The “problem politicians” that reflexively defended the abusers were just as bipartisan. Sen. Tim Wirth (D-Colo.) primarily represented the interests of the cable companies that were headquartered in his state. Current Senate Majority Leader Harry Reid (D-Nev.) also defended the cable companies. Sen. John Danforth (R-Mo.) was outraged at the abuses cable operators like TCI heaped on Missouri consumers and not only introduced legislation to stop the abuse in 1992, he also was instrumental in overriding a presidential veto of the measure.

The first mistake one can make in this fight is characterizing this as “progressive” vs. “conservative.” Real conservatives want all-out competition to manage winners and losers. Progressives want to make sure in the absence of that competition, someone — anyone can act to check the power of concentrated markets that suppress competition, raise prices, and deliver less than compelling service. Five years ago, Barack Obama promised change and a D.C. reset that would have ended “politics as usual.”

The art of the possible — changing the perception that consumer interests take a back seat to the whims of professional lobbyists at the FCC has proved less than successful after four years with Julius Genachowski. President Obama is not completely responsible, but it would be dishonest not to hold him to a promise he would deliver “change we can believe in.”

Instead, at the FCC, we got “change we think we might be able to get away with, maybe, or not.”

Julius Genachowski remained silent on the AT&T/T-Mobile merger until the Department of Justice provided him with political cover to oppose it. He caved on strongly enforcing Net Neutrality, refused to make important regulatory declarations that would have satisfied federal courts the FCC has a right to oversee broadband policy, and near the end of his tenure, hobnobbed with the cable industry and declared his support for usage billing and capped Internet.

Where Does Mr. Wheeler Stand?

So we must ask ourselves, where does Mr. Wheeler, a man who spent most of his career as a consummate cable and wireless industry lobbyist, fall on these issues?

The best place those of us who have not shared lunch with him can make that determination is in his personal blog. Harold wants us to downplay some of Wheeler’s words written during his six years of blogging:

But in the ten years I’ve been blogging, I know that I’ve said many things that do not necessary reflect what I would have done if I had been the ultimate decisionmaker – as I have said on more than one occasion (noting that actual decisionmakers are not advocates). Certainly anyone who reads ten years worth of Tales of the Sausage Factory (has it really been ten years?) will have an excellent sense of my overall priorities and approach. But I can’t swear that all approximately 500 or so blog posts could hold up today as being either accurate predictions (like Wheeler, I too was a big believer in WiMax) or final expressions of what I would have done as Chair of the FCC.

We certainly agree that Wheeler’s predictions of industry trends like WiMAX, in hindsight, are not deal breakers (although they should serve as reminders that one should avoid picking too many winners and losers). But at the same time, Wheeler’s words on policy matters in nearly 60 articles since 2007 should not be ignored, rationalized away, or dismissed either. In some sense, this is comparable to the vetting process for an appointee to the Supreme Court. To get a feel for the philosophy of an individual, both the White House and Congress pour over one’s writings and public opinions. Being asked to accept someone who can reshape public policy for years based on the personal recommendation of others only goes so far.

Many of Wheeler’s views are profoundly concerning, because they seem to betray a telecom industry conventional wisdom about the state of technology, wireless spectrum, regulation, and competition. His familiarity and comfort working within the paradigm of big cable and wireless is strongly contrasted with his suspicions and surprise regarding interlopers like Google and Apple — dubbed by Wheeler as part of a “Silicon Mafia.” We sense Wheeler seems most comfortable expecting to oversee business as usual, while advocating and accommodating some minor innovation here and there.

What is almost completely absent in most of Wheeler’s writings is the perspective of, or concern for ordinary consumers. What would Mr. and Mrs. Joe Average think about yet another consolidating merger between AT&T and one of its smaller competitors? What impact would another cable merger have on the bills paid by ordinary people in Colorado, Nebraska, or Pennsylvania? Is it good for consumers to advocate eliminating wireless network redundancy, as Wheeler does, after major events from 9/11 to Hurricane Sandy to the recent Boston Marathon attack all reveal wireless networks are susceptible to call volume clogging and extended service outages?

More importantly, we are disturbed by Wheeler’s perspective about wired infrastructure that could have a major impact on the near future of rural telecommunications. Wheeler comes dangerously close to AT&T’s sentiments about its yesteryear rural landline network and its wish to switch those customers to wireless (with all the added costs, usage caps, and coverage issues). We cannot help but notice Wheeler frames the general issue much like AT&T does: an “evolution” that represents “weaning ourselves” from “the old wireline.” Ask yourself if AT&T is more or less comfortable knowing Mr. Wheeler’s attitudes about its wired telephone network. AT&T considers it an outdated money-loser and a nuisance in its rural service areas. Wireless is a license to print money, just as soon as the FCC and state regulators give the green light to go ahead. Is Wheeler to be the deciding vote?

We Don’t Believe Wheeler is an ‘Industry Plant’

Harold writes:

But while it is important to ask the right questions and give no one a free pass, it is equally important to evaluate the answers and the evidence fairly and accept their logical conclusions. The evidence that Wheeler would have approved the AT&T/T-Mobile merger had he actually been Chairman (rather than playing pundit) is pretty weak. To take that a step further and say that Wheeler’s justification for approving the merger as a means of reregulating the wireless industry was mere sham to hide his true sympathies seems to me exceedingly unjustified.

That mischaracterizes our sentiments about Mr. Wheeler. We do not believe he is some secret industry plant that is itching to deregulate the agency into a stupor. Nor do we believe a theoretical vote in favor of the AT&T/T-Mobile merger is evidence he is in AT&T’s back pocket specifically. Let us be clear: he served as a professional lobbyist for these companies for nearly 30 years. His job was to absorb and reflect the views of the nation’s biggest cable and phone companies both to politicians and regulators. Some remain friends and colleagues.

It is a safe bet most of the industry will welcome and celebrate Wheeler’s appointment. Many know him personally. Many others will feel safe that he is a reachable industry insider already familiar with the issues that concern them. This is what makes the D.C. revolving door so insidious. When you move from the regulated to the regulator (and back again), the only real outsiders are average consumers.

Here is an example of Wheeler admiring AT&T’s prowess in the early days of its attempted merger with T-Mobile. Notice how he characterizes the deal’s opponents:

“The most important times in any merger approval process are the first two weeks when the acquiring company gets to define the discussion and the last four weeks when the concerns raised by others and the analysis by the government congeals to define the issues to be negotiated in the final outcome. AT&T shot out of the blocks brilliantly, framing their action in terms of the spectrum shortage and President Obama’s desire to provide wireless broadband to rural areas. Over the coming months those who were caught by surprise, as well as those who would use the review process to gain their own advantages, will have organized to present their messages.”

Wheeler shows no evidence of being the FCC’s version of a game-changer like Elizabeth Warren. Instead, he’s an avowed admirer of AT&T’s top lobbyist Jim Cicconi. What will that difference mean? The New York Times, reporting more broadly on the problem of D.C.’s revolving door, provides some valuable clues:

Government officials and lobbyists agree that former agency officials have a much easier time getting phone calls or e-mail messages returned from their old colleagues, and that access often extends to greater credibility in arguing their clients’ positions.

One corporate lobbyist who worked as a regulator, asked whether he believed he had an inside edge in lobbying his ex-colleagues, said: “The answer is yes, it does. If it didn’t, I wouldn’t be able to justify getting out of bed in the morning and charging the outrageous fees that we charge our clients, which they willingly pay.”

The lobbyist, who spoke on condition of anonymity because of concerns about alienating government officials, added that “you have to work at an agency to understand the culture and the pressure points, and it helps to know the senior staff.”

The most likely outcome of a Wheeler nomination is that he will be quickly approved, maintain the agency’s relatively low profile, and avoid rocking the boat too much. Even he doubts the power of the FCC to effect regulatory change unless those regulated volunteer to submit to more regulation. That means more quid pro quo agreements attached to mergers, acquisitions, and other deals the industry brings the FCC for approval. But as this quote illustrates, the industry remains in the driving seat:

“[…] Jim Cicconi sits astride a process that could determine the future of wireless policy, first for AT&T and then by extension for everyone else. Quite possibly the result of this merger decision will be far wider than the merger itself. At the end of the day we may be talking about a new era of wireless policy based on the Cicconi Commitment.”

Wheeler argued that the inability of the FCC to muster the political will to deal effectively with net neutrality and other broadband regulation made a consent decree around AT&T/T-Mobile the best way to update consumer protection rather than leave these services essentially unregulated.

Wheeler’s recognition of the inability of the FCC to get virtually anything done comes with no assurance he will do any better. Harold himself admits that the FCC’s track record of enforcement is “pathetic.” Has Wheeler written on his blog that he would seek to change that?

Wheeler’s reflections on the failed T-Mobile/AT&T merger present a clear sign he considers it a missed opportunity, with the usual voluntary divestiture of certain assets here and there with time limited pre-conditions that carry all the impact of one of those class action settlements that nets consumers a coupon or a $2 refund. Everybody but consumers walk away winners.

The Justice Department’s antitrust division, in contrast, illustrated the usefulness of a backbone when it quickly declared the merger proposal monstrously anti-consumer and anti-competitive and announced it would sue to stop it. Deal over and dead. When is the last time the FCC issued such a clear-cut, high-profile decision all on its own? Why is it so hard for the FCC to see the same anti-competitive nightmare so visible at the Department of Justice? Public Knowledge and other consumer groups saw the dangers from day one. Does Mr. Wheeler agree with the Justice Department or does he think he can do business with that shrewd AT&T lobbyist Jim Cicconi to get such deals approved the ‘right way?’

Our view remains the country and the Obama Administration could do far better choosing someone to lead the FCC that has not made a career lobbying for big cable and phone companies. If we want to solve America’s rural broadband problems, enforce fair billing practices and Net Neutrality, find new creative ways to utilize and distribute wireless spectrum, and promote competition while restricting industry consolidation, would we do better choosing an ex-industry lobbyist or an engineer, network planner, professional regulator, or an antitrust attorney?

President Obama went with the ex-lobbyist.

The Department of Justice has recommended the Federal Communications Commission promote competition by setting aside certain future low-frequency wireless spectrum for auctions open exclusively to smaller wireless carriers including Sprint and T-Mobile USA.

“Today, the two leading carriers have the vast majority of low-frequency spectrum whereas the two other nationwide carriers have virtually none,” the Department of Justice wrote in comments to the FCC. “This results in the two smaller nationwide carriers having a somewhat diminished ability to compete, particularly in rural areas where the cost to build out coverage is higher with high-frequency spectrum.”

The Justice Department’s antitrust division has monitored the wireless industry with increasing concern consumers are not getting benefits from a robustly competitive marketplace increasingly concentrated in the hands of two wireless giants: AT&T and Verizon Wireless.

That dominance is made possible, in part, from the control of lower frequency spectrum, particularly in the 600-800MHz range that easily penetrates buildings and delivers a more reliable signal over longer distances than frequencies counted in the gigahertz. Verizon and AT&T control large swaths of these lower frequencies that work well indoors and provide longer distance coverage in rural areas. Conversely, Sprint and T-Mobile, among other smaller carriers, rely heavily on higher frequencies that need a larger network of cell towers to support good signal levels.

It often means rural customers may find reception with AT&T or Verizon Wireless but end up with a roaming indicator or no service at all with smaller providers.

The Justice Department worries that auctioning off future prime 600MHz spectrum carved out of the UHF television band reallocated for wireless services will end up in the hands of the deepest pocketed providers — AT&T and Verizon Wireless, and further hamper the ability of Sprint, T-Mobile and other small carriers to compete.

“Due to the scarcity of spectrum, the Department is concerned that carriers may have incentives to acquire spectrum for purposes other than efficiently expanding their own capacity or services,” writes the DoJ. “Namely, the more concentrated a wireless market is, the more likely a carrier will find it profitable to acquire spectrum with the aim of raising competitors’ costs. This could take the shape, for example, of pursuing spectrum in order to prevent its use by a competitor, independent of how efficiently the carrier uses the spectrum. Indeed, a carrier may even have incentives to acquire spectrum and not use it at all.”

The Justice Department echoes critics’ contentions that given a chance, large wireless carriers will “warehouse” acquired spectrum, unused, denying it from the competition. Carriers object to that claim, calling it baseless. But incentives remain for providers to drag their feet: spectrum warehousing forces competitors to pay even higher prices for other scarce spectrum, the necessity of constructing a larger network of costly cell towers to offer robust coverage, and fighting customers’ perceptions of inferior quality indoor phone reception.

In response, AT&T sent a multi-page, thinly veiled threat to sue if the Commission adopted the recommendations of the Justice Department.

“The Department is quite candid about its motive for this blatant favoritism: it hopes that reducing competition for the spectrum may enable Sprint and T-Mobile ‘to mount stronger challenges’ to AT&T and Verizon,” AT&T wrote in response. “Picking winners and losers in this fashion would be patently unlawful.”

AT&T also claimed the Justice Department’s recommendations were specifically tailored to help the two competitors, despite the fact neither company has shown much interest in acquiring low-frequency wireless spectrum, much less further expand the reach of their wireless networks:

“It is especially puzzling that the Department feels the need to help Sprint and T-Mobile in particular. Sprint already has by far the largest nationwide portfolio of spectrum, and holds vastly more spectrum than either AT&T or Verizon. It will also have ample financial resources at its disposal, as the Department has already approved Sprint’s purchase by Softbank, a financially strong Japanese company, and Dish Network has now made a competing offer for Sprint, citing the financial and strategic advantages of its own proposed combination.

Regardless of how this bidding war turns out, Sprint will receive a sizable infusion of cash, spectrum or both. T-Mobile, which is owned by Deutsche Telekom, one of the largest telecommunications companies in the world, just recently acquired substantial amounts of spectrum from both AT&T and Verizon, and is on the verge of completing a merger with MetroPCS that will add another trove of spectrum. So it is surely not for a lack of spectrum resources or financial backing that the Department needs to propose a financial giveaway to these companies.

Moreover, neither company even chose to bid at the Commission’s last auction of low-frequency spectrum, nor have they availed themselves of opportunities to acquire such spectrum in secondary markets. If low-frequency spectrum was critical to their business plans, as the Department simply assumes, someone should have informed their management, which has, instead chosen to acquire deep holdings in [higher frequency] PCS, AWS, and BRS/EBS spectrum.”

The Justice Department filing did not name Sprint or T-Mobile directly, but both companies are the only remaining national competitors to both AT&T and Verizon Wireless.

Spectrum set-asides are not unusual in telecommunications regulation. The Canadian Radio-television and Telecommunications Commission set aside significant wireless spectrum exclusively for new entrants to promote competition. Ultimately, the new competitors had little impact with less than a 10 percent market share and all three are now considered up for sale. That spectrum may eventually end up in the hands of the largest Canadian wireless companies regardless of the CRTC’s original intentions when license transfer restrictions expire in 2014. All three could be acquired by one or more of the major providers.