By Alina Selyukh
WASHINGTON (Reuters) - AT&T Inc on Thursday slammed the Justice Department for what it called "blatant favoritism" toward smaller wireless rivals in recommending that regulators help them compete in the forthcoming spectrum auction.
Eager to control more airwaves and satisfy a booming demand for wireless services, mobile companies are hoping to influence the Federal Communications Commission as it drafts rules for an auction that will profoundly shake up ownership of highly valuable low-frequency spectrum.
In a filing this month, the Justice Department asked the FCC to craft the rules in a way designed to promote competition, by ensuring that the top two providers, Verizon Communications Inc and AT&T, do not "foreclose" access or otherwise shut out the smaller Sprint Nextel Corp and Deutsche Telekom AG's T-Mobile.
In a response made public on Thursday, AT&T said the Justice Department approach amounted to "rigging spectrum auction to favor Sprint and T-Mobile" and would not only be unlawful but also risk jeopardizing the complex auction.
"To the extent Sprint and T-Mobile now conclude that they desire or need spectrum in the upcoming auction, they are perfectly capable of bidding for it and paying the market price like every other auction participant," Wayne Watts, AT&T's senior executive vice president and general counsel, wrote in the letter to FCC's five commissioners.
Watts added that both Sprint and T-Mobile are in merger negotiations that could boost their finances. Sprint is weighing rival bids from Japan's SoftBank Corp and Dish Network, while T-Mobile is working on a deal with MetroPCS Communications Inc.
The FCC auction of the low-frequency airwaves, valued for their ability to better reach through walls and other obstacles, would sell to wireless providers spectrum that now belongs to televisions stations. It would be held in 2014 or later.
Congress has directed the FCC to raise enough money through the process to reimburse broadcasters, fund a new public safety network and return some money to the Treasury.
Last week, six Republican lawmakers from the House of Representatives wrote to the FCC warning that following the Justice Department's cue - putting caps on how much spectrum one provider can own or otherwise limiting AT&T's and Verizon's participation in the auction - could lead to lower bids or even less spectrum being sold in the auction.
Sprint and T-Mobile, the No. 3 and No. 4 U.S. wireless providers, have lobbied for assurances they would be able to go to bat against their larger competitors.
On Thursday, T-Mobile USA's Tom Sugrue, senior vice president of government affairs, said the company agreed with competition experts at the Department of Justice and stood behind its own previous comments to the FCC "advocating for strong competitive rules" in the auction.
Sprint did not immediately comment on AT&T's filing but has previous called the Justice Department's approach "absolutely right." The Justice Department and Verizon declined comment.
(Reporting by Alina Selyukh; Editing by Ros Krasny and Tim Dobbyn)