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Exclusive: FCC poised to side with Verizon, AT&T in airwaves spat

The Federal Communications Commission (FCC) logo is seen before the FCC Net Neutrality hearing in Washington February 26, 2015. REUTERS/Yuri Gripas

By Alina Selyukh

WASHINGTON (Reuters) - U.S. telecoms regulators are leaning toward rejecting a T-Mobile US Inc (TMUS.N) request that more airwaves be set aside for smaller wireless companies like itself to bid on during a government auction next year, according to people familiar with the matter.

Such a decision, which could be finalized in coming weeks, would end months of speculation and vigorous lobbying by the nation's No. 4 cellular operator, which wants the Federal Communications Commission to further limit how much spectrum dominant U.S. carriers Verizon Communications Inc (VZ.N) and AT&T Inc (T.N) can buy in the auction.

The FCC voted last year to restrict the participation of Verizon and AT&T in the 2016 spectrum sale by reserving a piece of each market's airwaves for non-dominant carriers, but not to the extent sought by T-Mobile.

The vote was something of a compromise among the FCC's Democrats, who wanted to give smaller carriers a leg up but also to ensure that restrictions on the big carriers would not cut the proceeds of the auction, expected to be the agency's largest.

Though no recommendation has yet been prepared and the deliberations could still shift, the FCC staff's current thinking is that an adequate amount of spectrum has already been set aside for smaller carriers, according to the people familiar with the matter.

Regardless, FCC Commissioner Jessica Rosenworcel, often the FCC's swing vote in the three-member Democratic majority, appears disinclined to revisit the current plan, those and other people also said. All sources spoke anonymously because the matter is not yet public.

FCC spokesman Neil Grace said the FCC staff are working on various auction-related matters: "At this time, that preparatory work is active, remains ongoing, and no decisions have been made."

For its part, T-Mobile is confident that the FCC "will do the right thing by consumers in this auction and make sure AT&T and Verizon don't further consolidate their control over wireless access to the Internet," Andy Levin, T-Mobile's senior vice president of government affairs, said in a statement.

The auction will be a landmark one for the U.S. wireless industry as it will give participants their first chance since 2008 to buy low-frequency airwaves, highly prized for their ability to carry heavy data over long distances and through obstacles such as buildings.

That capability makes them particularly attractive for companies trying to satisfy growing consumer demand for data-guzzling devices and applications.

Last year's FCC vote largely limits Verizon and AT&T, which the telecoms watchdog estimates control almost two-thirds of the low-band spectrum across the country. The resulting rules reserve up to 30 megahertz, or less than half, of the spectrum in each market for non-nationwide carriers or companies with less than one-third of low-band spectrum there, such as Sprint Corp (S.N) and T-Mobile.

T-Mobile, in a recently formed coalition with Sprint, Dish Network Corp (DISH.O) and advocacy and trade groups, has been pushing the FCC to raise that reserve to 40 megahertz, or at least half of the spectrum, arguing that larger blocks of frequencies are critical for them to compete with bigger rivals.

Cable broadband company Charter Communications Inc (CHTR.O) has made a similar request to the coalition's, according to a regulatory filing disclosed this week. AT&T and Verizon have fought against the proposed change.

Another FCC airwave auction in January raised more than $40 billion, setting a record and showcasing the wireless industry's hunger for spectrum. That auction surprised investors with a strong showing by Dish, whose partners scooped up $13 billion worth of spectrum.

AT&T and Verizon spent the most in the sale, more than $18 billion and $10 billion, respectively.

Dish and T-Mobile have both pledged to participate in next year's auction; however, Sprint's Chief Financial Officer Joe Euteneur earlier this month indicated that the company may decide to skip it, according to reports from a J.P. Morgan industry conference.

(Reporting by Alina Selyukh, Editing by Soyoung Kim and Christian Plumb)