Att Acquisition by Bloom Berg

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BLOOMBERG GOVERNMENT

For over 30 years Bloomberg has been delivering vital information to financial and business

professionals. Now Bloomberg Government brings data, analytic tools, news and in-depthanalysis to professionals who need to understand the business impacts of government actions.

Bloomberg Government is the single online resource that puts all the critical information you

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Visit us at bgov.com for an inside look at the data, insights and analysis.

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Bloomberg Government is an information behemoth a news aggregator, government contract

database, Congressional staff directory and source for policy research and analysis all in one Web site.

The New York Times


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BLOOMBERG GOVERNMENT STUDY: AT&T, T-Mobile and Spectrum 2

TABLE OF CONTENTS

Section Page

Executive Summary....................................................................................................... 3

Introduction................................................................................................................... 5

Why Spectrum Matters .................................................................................................. 6

License Types ............................................................................................................... 7

Findings .......................................................................................................................... 8

49 Cellular Market Areas at Highest Risk for Divestiture .......................................... 9

Many Potential Buyers for Spectrum ......................................................................... 11

Increasing the Threshold Reduces Flagged Markets .............................................. 11

AT&T's Exclusion of AWS Spectrum Has Little Impact ........................................... 13

Potential FCC Actions ................................................................................................ 14

Methodology................................................................................................................ 17

Appendix...................................................................................................................... 24

Editors:

ANTHONY GNOFFO

JON MORGAN

Reviewers:

TED BUCKLEY, Ph.D.

Chief Economist

JASON ARVELO

Labor Analyst


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EXECUTIVE SUMMARY

Spectrum ownership will be a focal point in the regulatory review of AT&T's proposed

$39 billion purchase of Deutsche Telekom AG's T-Mobile USA unit. The merger would create

the nation's biggest wireless communications provider and the biggest holder of spectrum, theradio waves that power wireless communications.

The companies say they will use the spectrum to give customers better services, such

as high-speed mobile Internet access. The Federal Communications Commission, however,

may find that the combined company would own too much spectrum, limiting competition.

The FCC will examine any of the 734 cellular market areas, known as CMAs, where the

combined company would own more than about one third of the available spectrum. The

agency could require the companies to divest all or some of the spectrum that exceeds that

threshold as a condition of approving the deal, an event that would provide opportunities for

competitors to acquire new capacity.

The threshold now ranges from 95 megahertz to 145 megahertz, depending on the

market. The merged companies would meet or exceed the FCC's threshold in 202 markets,

including some of the nation's biggest, according to data compiled by Bloomberg. That means

more than a quarter of the markets could be the target of competitive review.

That doesnt mean, however, that the companies will be automatically forced to divest

spectrum in those markets. The FCC could change the thresholds, alter the definition for which

spectrum is included in the calculations or even add new capacity to the total by shifting

spectrum from other uses.

The commission has adjusted its thresholds for major wireless mergers three times

since 2004. This Bloomberg Government Study finds that even small adjustments could have a

significant impact on the number of markets that might come under scrutiny in the proposed

AT&T acquisition of T-Mobile. For example, raising the threshold by 10 megahertz would reduce

the number of markets under review by half. An increase of 20 megahertz would reduce the

number by almost 75 percent.

The FCC's method for calculating how much spectrum AT&T owns will also affect the

analysis. In previous mergers, the FCC excluded some types of spectrum. AT&T's filing

suggests the FCC exclude some of its holdings in a category known as "Advanced Wireless

Service" spectrum, or airwaves once reserved for government use that are being redeployed to

power carriers' third- and fourth-generation networks. If the FCC includes these frequencies

when calculating how much spectrum AT&T holds in each market, AT&T will exceed the

spectrum threshold in 10 markets in addition to the 202.

Looking at past mergers provides a clue to how the FCC may act. Before Verizon


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Wireless's 2008 acquisition of Alltel Corp., the two companies divested spectrum in every

market where they exceeded the threshold by 17 megahertz.

The combined AT&T and T-Mobile would exceed the threshold by 20 megahertz or more

in 35 metropolitan and 14 rural markets. The metropolitan markets include Atlanta, Dallas, Los

Angeles, Miami, San Francisco and Seattle.

Among the carriers that would be able to buy divested spectrum without themselves

exceeding the FCC threshold are Clearwire, Leap Wireless, SpectrumCo LLC, U.S. Cellular,

and Verizon Wireless, according to the data compiled by Bloomberg. Sprint Nextel would be

able to do so in each market except Los Angeles.


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combined AT&T and T-Mobile USA and how much these holdings exceed the most recently

applied FCC thresholds. Second, this study examines whether other carriers would exceed

regulatory thresholds, should they seek to purchase any spectrum AT&T divests. Third, the

study considers the potential changes should regulators adjust threshold levels.

The FCC analysis may begin as early as mid-June while requests for information from the

applicants should come in July. In the meantime, proponents and opponents can file comments

until May 28, 2011, followed by a 15-day reply period for applicants AT&T and T-Mobile USA.

Why Spectrum Matters

Wireless carriers use radio waves to carry data and voice traffic. Licenses to use radio

waves on specific parts of the spectrum in a geographic area are auctioned by the FCC.4 As a

result, the amount of spectrum in any given cellular market area is a finite resource. While the

commission has taken steps to add spectrum licenses to the wireless market, the commissionreports increases in spectrum supply have not kept up with demand, causing a shortage that

FCC Chairman Julius Genachowski often refers to as a "spectrum crunch."5

As outlined in the Bloomberg Government Briefing "Spectrum Allocation: Finding the

Airwaves' Best Use," mobile data traffic is expected to grow at a compound annual rate of 92

percent through 2015 -- growing from 240 petabytes in 2010 to 6.3 exabytes in 2015 -- taxing

the frequencies as deployed today.6 This looming growth has precipitated a policy fight between

wireless carriers and television broadcasters. The wireless carriers want the FCC to ease the

spectrum crunch by reallocating television broadcast spectrum to wireless phone and data

services.

AT&T has specifically cited a shortage of available spectrum as one of the key drivers

for its proposed acquisition of T-Mobile. The company argues that it needs the spectrum to keep

up with demand, and that it can more efficiently utilize scarce spectrum resources than could a

stand-alone T-Mobile.

4Edward Goodmann,Bloomberg Government Briefing: "Spectrum Allocation: Finding the Airwaves' Best Use" February 2011,

"http://www.bgov.com/media/news/CiIUc-hO0dwo-yjuamUyTw" retrieved May 9, 2011

5Todd Shields, Bloomberg News "Verizon, AT&T, T-Mobile May Get Airwaves at Auction of U.S. TV Spectrum" January 20, 2011,

http://www.bloomberg.com/news/2011-01-20/verizon-at-t-may-get-airwaves-at-auction-of-u-s-tv-spectrum.html retrieved May 9,2011

6Edward Goodmann,Bloomberg Government Briefing: "Spectrum Allocation: Finding the Airwaves' Best Use" February 2011,

"http://www.bgov.com/media/news/CiIUc-hO0dwo-yjuamUyTw" retrieved May 9, 2011


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License Types

In its mission to eliminate interference on the airwaves, the FCC issues different types of

licenses, depending on the spectrum band and the type of service. Mobile voice and data

services use many types of licenses. This is a result of both the evolution of wireless

technologies and the on-going auction of airwaves to wireless carriers. Since 1994, more than

36,000 spectrum licenses have been auctioned, raising billions of dollars.7 Ten types of licensespresently comprise the 547 megahertz range considered by the FCC to be suitable for voice

and data services.8

Pertinent to this study are the Advanced Wireless Service (AWS) and Educational

Broadband Service (EBS), two license types that have been treated differently by the

commission in recent analyses. Licenses for Advanced Wireless Service spectrum, airwaves

once reserved for the government but being redeployed to power carriers' third- and fourth-

generation networks, were auctioned in 2006. AT&T argues that certain of these licenses

should not count toward its total holdings.9 Educational Broadband Service spectrum had been

7Federal Communications Commission "Auctions Summary" http://wireless.fcc.gov/auctions/default.htm?job=auctions_all Note;

this is a tabulation of all licenses auctioned, not exclusively those auctioned to wireless carriers. , retrieved April 28, 2011

8Federal Communications Commission Staff Technical Paper "Mobile Broadband: The Benefits of Additional Spectrum" October

2010, http://download.broadband.gov/plan/fcc-staff-technical-paper-mobile-broadband-benefits-of-additional-spectrum.pdf retrievedApril 29, 2011

9Federal Communications Commission, Acquisition of T-Mobile USA, Inc by AT&T Inc, Description of Transaction, Public Interest

Showing and Related Demonstrations, Filed with the Federal Communications Commission April 21, 2011 ("AT&T Application"),http://www.fcc.gov/transaction/att-tmobile.html retrieved April 27, 2011


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reserved for schools and universities but is being transitioned to consumer use. Most licenses

for this spectrum are owned by Clearwire, a company in which Sprint holds a majority interest.

When considering the AT&T merger, the FCC may choose to include some or all advanced

wireless service or educational spectrum. The FCC's decisions on these licenses will determine

the total spectrum available in a market, as well as how much AT&T is determined to hold.

Findings

For each of the 734 cellular market areas, the FCC determines a threshold of acceptable

spectrum ownership, which ranges from 95 MHz to 145 MHz based on the availability of

spectrum in that market. In rare cases, counties within a cellular market area will have different

spectrum thresholds. According to AT&T, 93 percent of market areas have one or more

counties where the spectrum threshold is at the highest level, 145 MHz.10

AT&T's application acknowledges that the combined spectrum holdings of it and T-Mobile meet or exceed the FCC's current threshold in one or more counties located within 202

cellular market areas.11

If the commission follows the screening procedure it used for its review of AT&T's

purchase of Centennial Communications Corp. in 2009, each of these 202 flagged markets will

be scrutinized to determine whether the combined company can exert market power over

competitors.

10Percentage reflects each market area's highest threshold county




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49 Cellular Market Areas at Highest Risk for Divestiture

Among the 202 markets that may be flagged for review are 49 where the combinedcompany would have at least 20 MHz more than the FCC's threshold, representing the areas

where spectrum is at highest risk for divestiture. During the FCC review of the Verizon Wireless

purchase of Alltel Corp., all flagged markets that were at least 17 MHz above the threshold

ended up being divested.

The FCC distinguishes between rural markets, known as Rural Service Areas (RSAs),

and markets based around metropolitan areas, known as Metropolitan Statistical Areas (MSAs).

The 49 at highest risk for divestiture are 35 metropolitan areas, including Atlanta, Dallas, Los

Angeles, Miami, San Francisco and Seattle and 14 rural markets.

Because some markets contain more than one county, analysis required consolidating

county-level data into market-level data. To consolidate the county-level AT&T filing into a

cellular market-level analysis, this study considered a market above the threshold if the

combined company's spectrum holdings exceed the threshold in at least one county.

Based on this analysis, the combined holdings of the merged company are at least 20

MHz above the applicable threshold in 35 markets:


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Many Potential Buyers for Spectrum

If the combined company decides or is ordered to divest airwaves in any of the markets

reviewed by the FCC, potential buyers would also be subject to regulatory review, including a

spectrum threshold screen.

To test whether others would be able purchase airwaves, this study compared the

screening threshold to the spectrum holdings for certain wireless carriers: Clearwire12, Leap

Wireless, SpectrumCoAWS, Sprint Nextel, U.S. Cellular, and Verizon Wireless.

Data compiled by Bloomberg shows that each of these carriers would be able to buy the

potentially available spectrum without exceeding current FCC threshold for review, except for

Sprint Nextel in the Los Angeles market.13

Increasing the Threshold Reduces Flagged Cellular Markets

The FCC may adjust the spectrum threshold for each market as it did in AT&T's

purchase of Dobson Communications Corporation, Verizon's acquisition of Alltel, and Sprint's

purchase of Nextel.14 In recent years, as the FCC has added spectrum to the wireless market,

the acceptable threshold has increased. The current spectrum screen was cited in the FCC's

2009 AT&T-Centennial Wireless transaction order.

12For analysis purposes, Clearwire holdings were consolidated with Sprint Nextel. Sprint Nextel owns 51 percent ofClearwire.

13The Los Angeles cellular market area includes Los Angeles, Long Beach, Anaheim, Santa Ana, Garden Grove, Riverside, San

Bernardino and Ontario, California. A combined Sprint Nextel and Clearwire currently exceeds the threshold in Riverside County,

14Annual Report and Analysis of Competitive Market Conditions With Respect to Mobile Wireless, Including Commercial Mobile

Services, WT Docket No. 09-66, Fourteenth Report (2010) ("FCC Wireless Competition Report"),http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-10-81A1.pdf. retrieved May 9, 2011


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The FCC sets a megahertz threshold in each market based on the license types used for

mobile voice and data services. Two such license types, Broadcast Radio Service (BRS) and

Advanced Wireless Service (AWS) licenses, have been used in recent reviews to determine

which level to apply in each market. The more license types active in a given market, the more

spectrum there is available for use. In recent years, the commission has tended to increase the

threshold level where more license types are available.

All other factors remaining the same, a threshold increase of 10 megahertz could almost

halve the number of cellular markets identified in the initial screen. Moving the threshold up 20

megahertz would reduce the number of markets that meet or exceed the guideline to 49, or less

than 25 percent of the ones that were originally flagged.


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Chart: Small Adjustments, Big Change

If the FCC adjusts the spectrum ownership threshold that triggers it to consider ordering merging wirelesscompanies to divest some of their holdings, the number of markets subject to such review for AT&T and

T-Mobile would drop dramatically.

Source: Bloomberg Government research, AT&T Application to FCC, Appendix A

Note: CMAs determined by FCC in 1990

AT&T's Exclusion of AWS Spectrum Has Little Impact

AT&T' asserts in its filing that certain spectrum holdings in the advanced wireless service

range should not to count toward the "post-transaction attributable spectrum" total since some

of the spectrum is still being transitioned from federal use. As a result, AT&T excluded it from its

calculation of attributable spectrum in 253 of 3,233 counties. Many of the cellular markets where

these counties are located were already flagged from other counties within the market. As a

result, only 10 new cellular markets will be flagged if the FCC chooses to "add-back" the

advanced wireless spectrum which AT&T has chosen to exclude.

0

25

50

75

100

125

150

175

200

225

+0MHz

+5MHz

+10MHz

+15MHz

+20MHz

+25MHz

+30MHz

+35MHz

+40MHz

+45MHz

+50MHz

+55MHz

+60MHz

+65MHz

+70MHz

+75MHz

+80MHz

Number

ofFlaggedMarkets

Increase in Spectrum Screening Threshold (MHz)

Rural Areas

Metro Areas


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Impact of Including Advanced Wireless Service Spectrum:Additional Cellular Markets to Be Flagged

Cellular Market Name Market Type Amount of Spectrum OverThreshold (MHz)

California 8 - Tehama Rural 18 MHz

Santa Barbara-Santa Maria-Lompoc,California

Metropolitan 16 MHz

Phoenix, Arizona Metropolitan 15 MHz

Eugene-Springfield, Oregon Metropolitan 10 MHz

Redding, California Metropolitan 8 MHz

Las Cruces, New Mexico Metropolitan 6 MHz

Oregon 5 - Coos Rural 3 MHz

Yakima, WA Metropolitan 3 MHZ

Laredo, TX Metropolitan 1 MHz

Texas 19 - Atascosa Rural 1 MHz

Source: AT&T Application to FCC, Appendix A ;Note: CMAs determined by FCC in 1990

Potential FCC Actions

TheFCC may adopt one of several approaches in its review:

The 'Give-to-Get' Approach

The commission may condition approval on the divestiture of spectrum licenses or other

operations. AT&T may also volunteer to divest spectrum. Such transactions would also be

subject to review by the FCC. In 2008, Verizon Wireless sold spectrum licenses in more than

100 markets -- mostly on a voluntary basis -- to win FCC approval of its acquisition of Alltel

Corp.15

The 'Move-the-Goalposts' Approach

Before 2004, the FCC applied a hard cap to carriers' spectrum holdings.

16

The sharpincrease in demand for mobile services has altered the review process to include a market-

15Applications of Cellco Partnership d/b/a Verizon Wireless and Atlantic Holdings LL, WT Docket No. 08-95, Memorandum Opinion

and Order and Declaratory Ruling 27 (2008) ("Verizon Wireless Order")




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specific threshold. The FCC's preference has been to limit any single competitor's ownership of

spectrum in a market area to about one-third of the total spectrum capacity17, reinforced in the

order approving Spring Corp.'s acquisition of Nextel Communications Corp.18 The one-third

marker has remained relatively constant, despite increases in the nominal threshold level. The

commission also considers license types, adjusting analysis to the variety of licenses availablein each market.19

The 'Balancing-Test' Approach

Another approach considers potential public benefits that outweigh the competitive

harms of a transaction. The FCC uses a "sliding scale approach" to evaluate benefits claimed

by the applicant. This study will not directly answer questions on this approach but will address

it further in discussion.

AT&T asserts spectrum consolidation would benefit consumers by relieving some of the

growing pressure on national airwaves.20 With three major carriers providing services on the

airwaves instead of four, AT&T says, the remaining companies could each offer more robust

services, such as faster data-transfer rates. AT&T argues that this public interest benefit

outweighs the loss of competition.

The FCC hasn't awarded a public interest exemption to AT&T, Verizon, or Sprint in any

of the most recent major wireless company transactions.21 AT&T is attempting an interesting

balancing act by playing to the commission's and Obama administration's concern about the

expansion of wireless services and the "spectrum crunch." The analysis indicates that AT&T will

become a dominant holder of spectrum in the U.S., but would be able to vastly improve

coverage for its customers. The weight the FCC gives these claims and the manner by whichsuch benefits are quantified against the potential damage wrought by the deal may provide an

avenue for approval.

Once the FCC determines the markets where the consolidated company's spectrum



18Applications of Nextel Communications, Inc. and Sprint Corporation, WT Docket No. 05-63, Memorandum Opinion and Order

(2005) ("Sprint-Nextel Order")

19Applications of AT&T Inc. and Dobson Communications Corporation, WT Docket No. 07-153, ("Dobson Order"), (2007) ("Dobson

Order")




(2005) ("Sprint-Nextel Order"); see also: Applications of AT&T Inc. and Dobson Communications Corporation, WT Docket No. 07-153, ("Dobson Order"), (2007) ("Dobson Order"); Applications of Cellco Partnership d/b/a Verizon Wireless and Atlantic Holdings LL,WT Docket No. 08-95, Memorandum Opinion and Order and Declaratory Ruling 27 (2008) ("Verizon Wireless Order")


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exceeds guidelines, it then has to determine whether consumers and competitors will be

harmed. It can then take several actions:

Accept the application without any conditions.

Accept the application conditioned upon sale of spectrum or fixed assets in specificmarkets.

Accept the application conditioned upon the sale of operations in specific markets

Accept the application conditioned upon other commitments (discussed more thoroughly

in the Bloomberg Government Briefing "AT&T's Acquisition of T-Mobile USA: The FCC

Review").22

Designate the application for a trial-type hearing before an administrative law judge.

(According to the FCC, application denials without a hearing are possible only in very

limited circumstances.)

22Afzal Bari and Edward Goodmann, Bloomberg Government Briefing "AT&T's Acquisition of T-Mobile USA: The FCC Review"

April 2011, http://www.bgov.com/media/news/ip3aqkAPvQHhSu7CDkUaiw


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METHODOLOGY

This analysis emulates the FCC's process for identifying markets where the combined

AT&T and T-Mobile would possess spectrum licenses in excess of the commission's threshold

that would trigger a closer investigation. The study drew from two sources, (1) AT&T'sapplication to the FCC including an appendix of spectrum assets listed by county and cellular

market area; and (2) the FCC Spectrum Dashboard, a public database of spectrum licenses

retrievable by, among other qualities, geographic area, licensee name, and frequency band.

AT&T Data

The AT&T application appendix filed with the FCC lists AT&T and T-Mobile spectrum

assets grouped by county and cellular market area. The holdings are broken into their

respective license-types and assume the successful purchase of Qualcomm spectrum agreed to

in December but awaiting commission approval. T-Mobile USA holdings are broken down using

the same method. The record also reports "post-merger attributable spectrum" -- AT&T's

reckoning of the spectrum total per county -- and the screening threshold based on licenses

available in each county.

View of AT&T's FCC Merger Application - Appendix A

Source: AT&T Filing to the FCC

The AT&T filing data were used to determine the number of markets flagged based on

the most recent FCC screening practices. The data also provided the basis for identification of

the most highly concentrated markets and the threshold sensitivity analysis showing the impact

of adjusted thresholds. The data was also used to scrutinize AT&T's exclusion of some AWS

spectrum in its "Post-Transaction Attributable Spectrum".

The FCC's Spectrum Dashboard lists the licenses and details of U.S. spectrum

allotments for wireless carriers and other spectrum holders (including TV and satellite

providers). This study utilizes records for 9 large spectrum holders23 and several local carriersthat were downloaded from the FCC site on April 27, 2011.24 Each license corresponds with at

23The four nationwide carriers, AT&T, Verizon, Sprint, T-Mobile USA, as well as Qualcomm who has agreed to sell 700 MHz

holdings to AT&T pending FCC approval; as well as four regional players: U.S. Cellular, Clearwire, Leap, and SpectrumCoAWS

24For example: Madison, WI (TDS Telecom: 4 licenses), Southern Ohio (Cincinnati Bell: 9 licenses), Alaska (Alaska

Communication Systems: 11 licenses; GCI communications 30 licenses), West Texas, New Mexico, Arizona (Plateau Wireless: 15licenses)


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least one record listing the spectrum range, the geographic location, and other operational

information.25 This study utilizes the data detailing the megahertz of spectrum held in a given

market determined by the geographic area specified by the record.

This data was used to analyze potential buyers of divested spectrum. By breaking the

records into market-based snapshots (as in the AT&T filing), the resulting database reflects

carrier, license type, Cellular Market Area, and total megahertz at the cellular market area level.

Analyzing Data from the AT&T Application

Bloomberg Government followed these steps:

Step One Reformat Data for Processing: Convert the Adobe PDF version ofAT&T's FCCApplication, Appendix A into comma-separated value format, which can be read by Microsoft

Excel.

Step Two Perform Basic Calculations: Add basic calculations and lookups to other sourcesby adding the following columns:

a) Create column "Original" with the formula.

b) Original = "Post-Transaction Attributable Spectrum" "Current Screen."

c) Note that the current screen varies by county and by market, from 95 MHz to 145

MHz. For this Bloomberg Government study, the current screening threshold foreach market was taken into account in all calculations.

d) Create columns "CMA Name" and "MSA/RSA" by looking up the CMA number in the

CMA Names cross-reference spreadsheet, available at

http://wireless.fcc.gov/auctions/data/crossreferences/cmanames.xls.

e) Create column "AT&T Sum" and "T-Mobile Sum" with the formulas:

AT&T Sum = "AT&T Cellular" + "AT&T PCS" + "AT&T 700 MHz" + "AT&T AWS"

T-Mobile Sum = "T-Mobile Cellular" + "T-Mobile PCS" + "T-Mobile AWS"

25a) A license identifier, known as the license Call Sign; b)The legal name of the license holder; c)The "Common

Name" of the legal license holder (e.g. AT&T for AT&T's subsidiary New Cingular Wireless PCS, LLC); d) A specificband of spectrum (e.g. 824 MHz-835 MHz); e) The amount of total spectrum (e.g. 6 MHz for a band of 824 MHz-835MHz) f) The type of Radio Service (e.g. Cellular, 700 MHz, AWS, BRS, etc.) g) A specific geographic area, identifiedby Market Name, State, and County, using a U.S. Census standardized county code, known as the FederalInformation Processing Standard (FIPS) code.


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f) Create column "Sum of Spectrum" with the formula

Sum of Spectrum = "AT&T Sum" + "T-Mobile Sum"

g) Create column "Original Flag," with a value of 1 if the "Post-Transaction Attributable

Spectrum (MHz)" is greater or equal to the "Current Screen (MHz)"

Step Three Calculate AWS Impact: AT&T chose to exclude certain Advanced WirelessServices (AWS) spectrum from its "Post-Transaction Attributable Spectrum" calculation. In our

findings, we assume this exclusion to affect AT&T's tabulation of total spectrum held in given

markets. To quantify the impact of this exclusion, several columns were added:

a) Add column "AWS Difference," with the formulas:

b) "AWS Difference" = "Sum of Spectrum" - " Post-Transaction Attributable Spectrum

(MHz)"

c) Add column "AWS Screen." to quantify the new threshold if AWS was excluded. If

AWS Difference is 0, the threshold remained the same. If AWS Difference was not 0,

the threshold was determined using the following test:

If "BRS Available"=Yes (based on the filing) and "AWS Available"=Yes (based on

the presence of AT&T or T-Mobile AWS spectrum that was previously excluded)

then "AWS Screen"=145 MHz

If "BRS Available"=Yes and "AWS Available"=No then "AWS Screen"=115 MHz

If "BRS Available"=No and "AWS Available"=Yes then "AWS Screen"=125 MHz If "BRS Available"=No and "AWS Available"=No then "AWS Screen"=95 MHz

d) Added one column "AWS Flag." with a value of 1 if "Sum of Spectrum" is greater

than or equal to "AWS Screen"

Step Four Calculate Sensitivity: This study analyzes the impact of threshold changes to thenumber of markets flagged by the FCC. To achieve this, we assume the amount of spectrum

held by the post-merger company to be fixed, not expanding as the threshold is increased. This

distinction is made as threshold changes are often accompanied by the inclusion of new license

types, sometimes increasing the holdings of a given licensee. This study does not hypothesize

on the regulatory approach to threshold expansion and, as such, relies on a static estimation of

spectrum holdings, holding all other variables equal.

To calculate sensitivity to threshold changes, the following columns were added:


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a) Added 101 columns with values of 0 to 100 in the top header row.

For each cell, assume a value of 1 if the county's "Post-Transaction Attributable Spectrum" +

the column's value (e.g. 0-100) is greater than or equal to the county's "Current Screen (MHz)"

Step Five Calculate CMA-Level Dataset: The majority of Cellular Market Areas arecomprised of more than one county, the level at which AT&T's filing accounts for spectrum

holdings and screening thresholds. To conduct an analysis at the CMA-level, the maximum

threshold and holding totals were selected from the group of counties. While this method may

overstate the holdings of the combined company, this study's bias is to identify the most

markets eligible for FCC scrutiny.

To maintain consistency with the FCC methodology, a Microsoft Excel Pivot Table based on the

dataset above was created. The Pivot Table grouped all the data by CMA and included the

following:

a) Row Labels: "CMA Name," "MSA/RSA,"

b) Values: Max of "Original," Sum of "Original Flag"

For the purposes of this study, if one county in the CMA was above the threshold, then the CMA

was counted as "flagged".

Analyzing Data from the FCC's Spectrum Dashboard

Step One Download and Consolidate Records: Using the FCC Spectrum Dashboard, apublic database recording wireless spectrum licenses, retrieve records for 9 large spectrum

holders26 and local carriers.27 This study uses data that was downloaded from the FCC site on

April 27, 2011.The consolidated dataset includes more than 208,000 records.

Each record includes:

a) A license identifier, known as the license Call Sign.

b) The legal name of the license holder.

c) The "Common Name" of the legal license holder (e.g. AT&T for AT&T's subsidiary

26The four nationwide carriers, AT&T, Verizon, Sprint, T-Mobile USA, as well as Qualcomm who has agreed to sell 700 MHz

holdings to AT&T pending FCC approval; as well as four regional players: U.S. Cellular, Clearwire, Leap, and SpectrumCoAWS.

27For example: Madison, WI (TDS Telecom: 4 licenses), Southern Ohio (Cincinnati Bell: 9 licenses), Alaska (Alaska

Communication Systems: 11 licenses; GCI communications 30 licenses), West Texas, New Mexico, Arizona (Plateau Wireless: 15licenses).


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New Cingular Wireless PCS, LLC).

d) A specific band of spectrum (e.g. 824 MHz-835 MHz).

e) The total amount of total spectrum (e.g. 6 MHz for a band of 824 MHz-835 MHz).

f) The type of Radio Service (e.g. Cellular, 700 MHz, AWS, BRS, etc.).

g) A specific geographic area, identified by Market Name, State, and County, using aU.S. Census standardized county code, known as the Federal Information

Processing Standard (FIPS) code.

To maintain consistency with the methodology AT&T used in its FCC's filing, all Qualcomm

holdings are coded as AT&T holdings.

Sprint Nextel and Clearwire spectrum is also consolidated. In previous orders28, the FCC has

noted that any ownership stake of 10 percent or more in another company would cause the

spectrum holdings to be considered together. As of this writing, Sprint Nextel owns a majority of

Clearwire shares, according to company filings. No consolidation was required for other carriers:

Step Two Filter Records, Including only Flagged CMAs: Since this analysis seeks todetermine whether potential buyers will be eligible to purchase spectrum without triggering the

threshold, the dataset was filtered to only include the 202 CMAs where AT&T's and T-Mobile's

combined holdings is at or above the spectrum screen.

Step Three Eliminate duplicate records: The exported data from the Spectrum Dashboardincludes duplicate records that allocate the same spectrum in the same county and market area.

To eliminate the duplicate records, we created a new field, "Adjusted Spectrum Range." For

records with no duplicate records, "Adjusted Spectrum Range" equals the existing "SpectrumRange."

If there were multiple records where "County," "Market Name," "Spectrum Range," and

standardized "Common Name" matched, one record was kept as-is and subsequent records

(duplicates) had "Adjusted Spectrum Range" set to zero. For example, if five records each have

the same "County," "Market Name," "Spectrum Range," and standardized "Common Name," the

first records would stay and the other four would have "Adjusted Spectrum Range" set to zero.

In some cases these are due to leasing arrangements, in which case the record for the

owner's Total Spectrum was set to zero and the spectrum for the leasee was kept as-is. In other

cases, this is due to the nature of the export. In those cases, the first record was kept as-is andsubsequent records had Total Spectrum set to zero.


(2005) ("Sprint-Nextel Order"); see also: Applications of AT&T Inc. and Dobson Communications Corporation, WT Docket No. 07-153, ("Dobson Order"), (2007) ("Dobson Order"); Applications of Cellco Partnership d/b/a Verizon Wireless and Atlantic Holdings LL,WT Docket No. 08-95, Memorandum Opinion and Order and Declaratory Ruling 27 (2008) ("Verizon Wireless Order")


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Step Four Tabulate Records using Current FCC Convention: Tabulate the sum ofspectrum holdings for each common carrier.

a. Tabulate the sum of spectrum holdings for each of carrier, by county

b. Tabulate the CMA-level spectrum holdings for each carrier by averaging thespectrum for each county within the CMA.29

Each carriers spectrum holdings by CMA was then compared to the CMA's minimum

spectrum screening threshold, as listed in the AT&T filing. This comparison resulted in a

true/false field for each carrier and CMA combination:

This analysis resulted in a finding that (with the exception of the Los Angeles market) the

four nationwide wireless providers and eight regional competitors would be able to buy

potentially available spectrum without exceeding current FCC threshold for review.

Analysis Involving Both Datasets (AT&T and FCC)

To analyze the potential buyers for divestible spectrum in at-risk CMAs, a combined

analysis drew from both the AT&T and FCC datasets. For this analysis table, each row

represents an at-risk CMA, with each column representing a major national spectrum holder

(Leap, SpectrumCoAWS, US Cellular, Verizon Wireless, Sprint Nextel, Clearwire, AT&T, and T-

Mobile). Non AT&T and T-Mobile cells in this table have the average spectrum holdings for the

CMA. For example, if a CMA includes 4 counties where Leap owns 10 MHz in two counties and

20 MHz in two counties, the cell would list 15 MHz for the CMA. For AT&T and T-Mobile cells in

this table, the spectrum values are sourced from the AT&T filing.

Limitations

The spectrum dashboard provides raw licensing data and, in processing the analysis,

loses some nuance. This study's analysis considers the largest wireless carriers, but does not

consider smaller spectrum holders in local and state markets, for example Bluegrass Wireless in

Kentucky. These are not likely to significantly impact the findings as the FCC spectrum

thresholds target the most consolidated spectrum holders in a given market. Additionally, the

commission issues disclaimers emphasizing the tentative nature of listings on the dashboard.30

The AT&T filing also faces limitations. As seen in the analysis of AWS spectrum,skepticism must be exercised in interpreting the company's reported holdings where the FCC

has not issued definitive standards. Also, the inclusion of Qualcomm spectrum purchased

29A CMA one or more counties.

30See Appendix III


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attendant on the approval of the commission may overstate the combined entity's holdings. The

listings also occasionally diverge between the spectrum dashboard and AT&T's filing as county

names and geographic market definitions have changed.

When examining AT&T's spectrum holdings, the FCC Spectrum Dashboard data

sometimes differs from the AT&T Filing. Upon further analysis, the FCC Spectrum Dashboard

indicates bias toward overstating spectrum holdings in a given market. Using only spectrum

dashboard data would flag a total of 247 CMAs. Additionally, the AT&T filing identifies 11 CMAs

as over the spectrum screen that are not identified when using only the Spectrum Dashboard

data. This study favors the AT&T data as the company filing is a matter of the public record and

subject to scrutiny by the FCC. As a result, every finding, with the exception of the eligibility of

potential buyers, was derived using the AT&T filing data.

Neither dataset provides a perfect picture of the U.S. spectrum market, but represent the

most complete public records detailing the competitive landscape AT&T and T-Mobile USA face

in achieving approval. The records have been used to reinforce and correct each other by

eliminating redundancies and standardizing data formats. Despite a potential overstating of

holdings in some circumstances, the data and analysis provide a comprehensive review of

spectrum agglomeration using the most complete public records available for analysis.


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APPENDIX I: Metropolitan CMAs Where Spectrum Holdings In At Least One

County Is Greater Than Or Equal To The Threshold

CMA CMA Name Maximum

AmountAboveThreshold

% of Counties

In CMA At orAboveThreshold

270 Bellingham, WA 80 MHz 100%

97 Bakersfield, CA 56 MHz 100%

39 Salt Lake City-Ogden, UT 45 MHz 100%

111 Vallejo-Fairfield-Napa, CA 36 MHz 100%

105 Lancaster, PA 36 MHz 100%

7 San Francisco-Oakland, CA 36 MHz 100%

27 San Jose, CA 36 MHz 100%

9 Dallas-Fort Worth, TX 35 MHz 100%75 Austin, TX 35 MHz 100%

162 Brownsville-Harlingen, TX 35 MHz 100%

12 Miami-Fort Lauderdale-Hollywood, FL 33 MHz 100%

72 West Palm Beach-Boca Raton, FL 33 MHz 100%

117 Colorado Springs, CO 30 MHz 100%

10 Houston, TX 30 MHz 100%

17 Atlanta, GA 30 MHz 100%

19 Denver-Boulder, CO 30 MHz 100%

60 Orlando, FL 28 MHz 100%137 Melbourne-Titusville-Palm Bay, FL 25 MHz 100%

51 Jacksonville, FL 25 MHz 100%

2 Los Angeles-Long Beach/Anaheim-Santa Ana-GardenGrove/Riverside-San Bernardino-Ontario, CA

24 MHz 75%

220 Abilene, TX 23 MHz 100%

238 Sharon, PA 23 MHz 100%

101 Beaumont-Port Arthur, TX 23 MHz 100%

130 Erie, PA 21 MHz 100%

118 Reading, PA 21 MHz 100%

30 Portland, OR-WA 20 MHz 100%

20 Seattle-Everett, WA 20 MHz 100%

84 Harrisburg, PA 20 MHz 100%

82 Tacoma, WA 20 MHz 100%

168 Tallahassee, FL 20 MHz 100%

54 Gary-Hammond-East Chicago, IN 20 MHz 100%


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50 Honolulu, HI 20 MHz 100%

242 Olympia, WA 20 MHz 100%

68 Flint, MI 20 MHz 100%

99 York, PA 20 MHz 100%

234 Athens, GA 18 MHz 100%

170 Galveston-Texas City, TX 18 MHz 100%

121 Trenton, NJ 16 MHz 100%

76 New Bedford-Fall River, MA 16 MHz 100%

55 Worchester-Fitchburg-Leominster, MA 16 MHz 100%

6 Boston-Lowell-Brockton-Lawrence-Haverhill, MA-NH 16 MHz 100%

58 Allentown-Bethlehem-Easton, PA-NJ 16 MHz 100%

107 Stockton, CA 16 MHz 100%

38 Providence-Warwick-Pawtucket, RI 16 MHz 100%

123 Santa Rosa-Petaluma, CA 16 MHz 100%33 San Antonio, TX 15 MHz 100%

214 Richland-Kennewick-Pasco, WA 15 MHz 50%

212 Bremerton, WA 15 MHz 100%

128 McAllen-Edinburg-Mission, TX 15 MHz 100%

159 Provo-Orem, UT 15 MHz 100%

108 Augusta, GA/SC 15 MHz 100%

204 Aguadilla, PR 13 MHz 100%

91 San Juan-Caguas, PR 13 MHz 100%

88 Chattanooga, TN-GA 13 MHz 100%115 Utica-Rome, NY 13 MHz 100%

147 Ponce, PR 13 MHz 100%

202 Arecibo, PR 13 MHz 100%

169 Mayaguez, PR 13 MHz 100%

146 Daytona Beach, FL 13 MHz 100%

32 Hartford-New Britain-Bristol, CT 11 MHz 100%

197 Lake Charles, LA 11 MHz 100%

5 Detroit/Ann Arbor, MI 10 MHz 100%

86 Albuquerque, NM 10 MHz 100%

93 Las Vegas, NV 10 MHz 100%

167 Sarasota, FL 10 MHz 100%

77 Tucson, AZ 10 MHz 100%

171 Reno, NV 10 MHz 100%

25 Buffalo, NY 10 MHz 100%

35 Sacramento, CA 10 MHz 100%


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14 Baltimore, MD 10 MHz 100%

208 Fort Pierce, FL 10 MHz 100%

257 Hagerstown, MD 8 MHz 100%

3 Chicago, IL 8 MHz 100%

262 Danville, VA 8 MHz 100%

287 Bryan-College Station, TX 8 MHz 100%

301 Lawrence, KS 8 MHz 100%

244 Kenosha, WI 8 MHz 100%

303 Aurora-Elgin, IL 8 MHz 100%

304 Joliet, IL 8 MHz 100%

134 Atlantic City, NJ 6 MHz 100%

56 Northeast Pennsylvania, PA 6 MHz 67%

69 Wilmington, DE-NJ-MD 6 MHz 100%

49 New Haven-West Haven-Waterbury-Meriden, CT 6 MHz 100%302 Enid, OK 6 MHz 100%

73 Oxnard-Simi Valley-Ventura, CA 6 MHz 100%

4 Philadelphia, PA 6 MHz 100%

142 Modesto, CA 6 MHz 100%

57 Tulsa, OK 5 MHz 100%

22 Tampa-St. Petersburg, FL 5 MHz 100%

81 El Paso, TX 5 MHz 100%

112 Corpus Christi, TX 5 MHz 100%

109 Spokane, WA 5 MHz 100%46 Nashville-Davidson, TN 5 MHz 38%

175 Santa Cruz, CA 4 MHz 100%

151 Poughkeepsie, NY 4 MHz 100%

66 Youngstown-Warren, OH 3 MHz 100%

181 Muskegon, MI 3 MHz 100%

225 Altoona, PA 3 MHz 100%

295 Midland, TX 3 MHz 100%

193 Benton Harbor, MI 3 MHz 100%

300 Victoria, TX 1 MHz 100%

133 Manchester-Nashua, NH 1 MHz 100%

18 San Diego, CA 0 MHz 100%

100 Shreveport, Louisiana 0 MHz 100%

74 Fresno, CA 0 MHz 100%

15 Minneapolis-St. Paul, MN-WI 0 MHz 90%

96 Fort Wayne, IN 0 MHz 100%


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150 Visalia-Tulare-Porterville, CA 0 MHz 100%

31 Columbus, OH 0 MHz 100%

24 Kansas City, MO-KS 0 MHz 100%

114 Lakeland-Winter Haven, FL 0 MHz 100%

13 Pittsburgh, PA 0 MHz 100%

87 Canton, OH 0 MHz 100%

8 Washington, DC-MD-VA 0 MHz 100%


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APPENDIX II: Rural CMAs Where Spectrum Holdings In At Least One

County Is Greater Than Or Equal To The Threshold

CMA CMA Name Maximum

AmountAboveThreshold

% of

Counties InCMA At orAbove

Threshold

667 Texas 16 - Burleson 43 MHz 100%

488 Minnesota 7 - Chippewa 40 MHz 29%

372 Georgia 2 - Dawson 35 MHz 100%

660 Texas 9 - Runnels 28 MHz 64%

595 Ohio 11 - Columbiana 28 MHz 100%

500 Mississippi 8 - Claiborne 26 MHz 13%

643 Tennessee 1 - Lake 25 MHz 100%

695 Washington 3 - Ferry 25 MHz 100%

649 Tennessee 7 - Bledsoe 23 MHz 50%

612 Pennsylvania 1 - Crawford 23 MHz 75%

691 Virginia 11 - Madison 20 MHz 100%

693 Washington 1 - Clallam 20 MHz 100%

468 Maryland 2 - Kent 20 MHz 70%

698 Washington 6 - Pacific 20 MHz 100%

622 Pennsylvania 11 - Huntingdon 18 MHz 100%

445 Kentucky 3 - Meade 18 MHz 14%

322 Arizona 5 - Gila 18 MHz 50%

345 California 10 - Sierra 18 MHz 50%

346 California 11 - El Dorado 18 MHz 100%

699 Washington 7 - Skamania 18 MHz 50%

476 Michigan 5 - Manistee 16 MHz 25%

359 Delaware 1 - Kent 16 MHz 100%

478 Michigan 7 - Newaygo 16 MHz 100%

562 New York 4 - Yates 15 MHz 100%

674 Utah 2 - Morgan 15 MHz 100%

647 Tennessee 5 - Fayette 15 MHz 100%

726 Puerto Rico 4 - Aibonito 13 MHz 100%

403 Indiana 1 - Newton 13 MHz 67%

370 Florida 11 - Monroe 13 MHz 100%

724 Puerto Rico 2 - Adjuntas 13 MHz 100%

432 Kansas 5 - Brown 13 MHz 40%


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618 Pennsylvania 7 - Jefferson 13 MHz 67%

697 Washington 5 - Kittitas 13 MHz 100%

361 Florida 2 - Glades 13 MHz 50%

371 Georgia 1 - Whitfield 13 MHz 25%

591 Ohio 7 - Tuscarawas 13 MHz 17%

725 Puerto Rico 3 - Ciales 13 MHz 100%

659 Texas 8 - Gaines 11 MHz 31%

374 Georgia 4 - Jasper 11 MHz 20%

669 Texas 18 - Edwards 11 MHz 8%

606 Oregon 1 - Clatsop 10 MHz 100%

629 South Carolina 5 - Georgetown 10 MHz 67%

375 Georgia 5 - Haralson 10 MHz 80%

694 Washington 2 - Okanogan 8 MHz 33%

613 Pennsylvania 2 - McKean 8 MHz 33%395 Illinois 2 - Bureau 8 MHz 13%

623 Pennsylvania 12 - Lebanon 8 MHz 100%

384 Georgia 14 - Worth 8 MHz 18%

381 Georgia 11 - Toombs 8 MHz 44%

621 Pennsylvania 10 - Bedford 8 MHz 100%

487 Minnesota 6 - Hubbard 8 MHz 50%

668 Texas 17 - Newton 8 MHz 40%

690 Virginia 10 - Frederick 8 MHz 100%

704 West Virginia 4 - Grant 8 MHz 43%561 New York 3 - Chautauqua 8 MHz 50%

688 Virginia 8 - Amelia 8 MHz 100%

598 Oklahoma 3 - Grant 8 MHz 57%

363 Florida 4 - Citrus 8 MHz 25%

619 Pennsylvania 8 - Union 6 MHz 33%

602 Oklahoma 7 - Beckham 6 MHz 29%

477 Michigan 6 - Roscommon 6 MHz 17%

439 Kansas 12 - Hodgeman 6 MHz 60%

597 Oklahoma 2 - Harper 6 MHz 100%

360 Florida 1 - Collier 5 MHz 50%

339 California 4 - Madera 4 MHz 33%

563 New York 5 - Otsego 4 MHz 20%

340 California 5 - San Luis Obispo 4 MHz 100%

666 Texas 15 - Concho 3 MHz 38%

587 Ohio 3 - Ashtabula 3 MHz 100%


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553 New Mexico 1 - San Juan 3 MHz 40%

671 Texas 20 - Wilson 3 MHz 25%

617 Pennsylvania 6 - Lawrence 3 MHz 25%

650 Tennessee 8 - Johnson 3 MHz 100%

673 Utah 1 - Box Elder 3 MHz 33%

495 Mississippi 3 - Bolivar 3 MHz 33%

335 Arkansas 12 - Ouachita 3 MHz 10%

601 Oklahoma 6 - Seminole 3 MHz 14%

727 Puerto Rico 5 - Ceiba 1 MHz 100%

681 Virginia 1 - Lee 1 MHz 83%

729 Puerto Rico 7 - Culebra 1 MHz 100%

373 Georgia 3 - Chattooga 1 MHz 50%

440 Kansas 13 - Edwards 1 MHz 17%

655 Texas 4 - Briscoe 1 MHz 8%728 Puerto Rico 6 - Vieques 1 MHz 100%

656 Texas 5 - Hardeman 1 MHz 18%

723 Puerto Rico 1 - Rincon 1 MHz 100%

480 Michigan 9 - Cass 0 MHz 20%

491 Minnesota 10 - Le Sueur 0 MHz 29%


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APPENDIX III: FCC Spectrum Dashboard Data Disclaimer

"The data and analyses provided in the Spectrum Dashboard are for informational purposes

and research assistance only. The Spectrum Dashboard does not constitute the official

licensing records for the Commission. Specifically, the FCC makes no representations regarding

the accuracy or completeness of the information maintained in the Spectrum Dashboard.

"The data and analyses contained herein are not relied upon by the Commission in analyzing

the competitive marketplace or assessing the spectrum holdings of wireless service providers in

any particular geographic area.

"The Spectrum Dashboard is also not an endorsement by the FCC of any particular service,

technology, product, or service provider, and the FCC makes no representations or warrantiesabout the provision of service on the spectrum included in this database.

"Users should be aware that matters not reflected in the Spectrum Dashboard may relate to and

affect the status of FCC licenses, including spectrum leasing arrangements, transactions

pending before the FCC, transactions approved by the FCC but not consummated by applicants,

future proceedings before the FCC, or actions in the courts. Further, actions taken by the FCC

that may affect the status of licenses will not be reflected in the Spectrum Dashboard until the

next system update."

"Spectrum Totals by County: For purposes of the Spectrum Dashboard, spectrum totals may be

overestimated in a particular county. For instance, spectrum will be counted towards a licensee's

spectrum total for a county if at least one percent of the county falls within a license or service

boundary. Each county is then marked as being "fully" or "partially" covered. (See Fully Covered

and Partially Covered in the Glossary of Terms link.) For 800 MHz Cellular, the spectrum totals

by county may reflect spectrum covered by service area boundaries that extend beyond the

Cellular Geographic Service Area, which is the area in which the carrier is licensed to provide

service. This is not the method the Commission uses for determining spectrum totals in other

contexts, including the Annual CMRS Competition Report and other Commission reports, or for

conducting competitive review of license transactions for merger orders."31

31FCC Spectrum Dashboard, Understanding your Results, http://reboot.fcc.gov/reform/systems/spectrum-

dashboard/understanding-results. Retrieved April 29, 2011

Documents

Att Acquisition by Bloom Berg