T-Mobile Wants a Consolation Prize for Its Dead Merger

The cell-phone carrier is lobbying the FCC for access to more airwaves.

T-Mobile is hoping the Obama administration will show some sympathy after forcing the company to call off merger talks with Sprint.

The cell-phone provider is asking the Federal Communications Commission to come up with new rules that will give it access to more airwaves, which will mean better cellular service for its customers. T-Mobile's implicit argument is that it deserves an additional leg up over its competitors after the government killed its hopes of being bought by Sprint.

Sprint and T-Mobile never actually applied to merge, but they abandoned their talks last week due to obvious resistance from the FCC and Justice Department.

This week, T-Mobile filed a petition asking the FCC to rework its rules for an upcoming auction of spectrum—the airwaves that carry all wireless signals. Sprint filed a similar petition on related issues.

The FCC already enacted rules to favor T-Mobile and Sprint in the auction, which is planned for next year. The rules cap the amount of spectrum that the two largest carriers—Verizon and AT&T—can buy in each market around the country. The FCC's goal is to ensure that the two industry giants don't dominate the auction, accumulating enough spectrum to kill off competition and raise prices. Without adequate spectrum, a carrier's network would become congested and slow, leading customers to flee to competitors.

In a blog post Wednesday, T-Mobile's head of regulatory affairs, Kathleen Ham, said capping the largest carriers was "one of the most innovative and forward-thinking" actions the FCC has ever taken. But T-Mobile thinks the FCC should go farther.

"We want the FCC to do more of the right thing," she explained.

T-Mobile's formal filing with the FCC strongly alludes to the recent demise of its deal with Sprint. A main argument that FCC Chairman Tom Wheeler and leaders at the Justice Department made against the merger was that it was important to keep four independent carriers to preserve industry competition.

In its filing, T-Mobile said the FCC's rules for the spectrum auction are at "odds with its stated goal of promoting competition among four nationwide competitors."

The current framework "gives too much to the two dominant carriers at the expense of competition," T-Mobile claimed. The company wants the FCC to designate at least half of the spectrum in each market as off-limits to the largest carriers.

T-Mobile, the smallest of the four carriers, has struggled to compete with Verizon and AT&T. Sprint and T-Mobile saw a merger as the best way to gain the scale they need to be on equal footing with the industry leaders.

The FCC declined to comment on the petition.

Wheeler had said he would be willing to reconsider the rules for the auction if there was an important change in the marketplace (i.e. if Sprint and T-Mobile actually merged). But there haven't been any major changes in the three months since the FCC enacted the rules, so it appears that T-Mobile's bid is a long shot.

Walter Piecyk, an analyst for for research firm BTIG, said T-Mobile's filing is "clearly connected" to the recent demise of its Sprint deal. It would be unusual for the FCC to reverse its decision, but Piecyk insisted there's still time for the agency to tweak the rules before the auction next year.

T-Mobile has a "good argument" for why the FCC should reconsider "given that the FCC has set up some roadblocks for T-Mobile to gain scale with a merger with Sprint," he said.