AT&T may sit out auction if FCC spectrum plan is adopted

WASHINGTON (Reuters) - AT&T Inc might sit out a major U.S. auction of airwaves if regulators adopt rules that reserve some of the spectrum for smaller rivals, the No. 2 wireless company said in a filing released on Wednesday.

The Federal Communications Commission recently drafted some of the rules for the highly complex auction scheduled for 2015. The auction would reshuffle the ownership of valuable frequencies between TV stations and wireless carriers clamoring for faster speeds and better services for their devices.

FCC (FCC.MC)Chairman Tom Wheeler has proposed reserving part of the spectrum in each market for wireless carriers that do not already have dominant blocks of low-frequency airwaves, people briefed on the plan have told Reuters.

"Such restrictions would put AT&T in an untenable position, forcing AT&T to reevaluate its potential participation in the auction," Joan Marsh, AT&T's vice president of federal regulatory told Wheeler's legal advisor in a meeting on Monday, according to a filing released on Wednesday.

The third and fourth biggest U.S. carriers, Sprint Corp and T-Mobile US Inc have urged the FCC to limit how much spectrum the biggest competitors, Verizon Communications Inc and AT&T, should be able to buy. The two currently dominate the low-frequency airwaves, which are highly valued for their strength and reach.

The biggest carriers argue that restricting their participation would amount to preferential treatment by regulators and could dampen how much the FCC raises.

Congress has mandated that the FCC raise enough money to pay broadcasters for giving up airwaves, as well as help fund a new $7 billion public safety network.

Wheeler's proposal, which has yet to be reviewed by four other FCC commissioners, sets aside up to 30 megahertz of spectrum in each market for smaller carriers after bidding reaches a threshold, sources briefed on the plan said.

This would happen, for instance, if a particular bidding price per megahertz was reached, or enough money was raised to satisfy a congressional mandate, said one source about the plan that has not been publicly released

"If the restrictions as proposed are adopted, AT&T will need to seriously consider whether its capital and resources are directed toward other spectrum opportunities that will better enable AT&T to continue to support high-quality LTE network deployments to serve its customers," Marsh added.

(Reporting by Alina Selyukh; Editing by Jonathan Oatis and Andre Grenon)