Verizon and AT&T have urged the FCC not to restrict their ability to bid for the TV spectrum, arguing that the highest bidders would be able to put the spectrum to the best use. Republican lawmakers have also warned the FCC not to favor any particular bidders in the auctions.
But in its filing with the FCC, the Justice Department warned that AT&T and Verizon might buy up the spectrum not to use for their customers, but to choke off their competitors' access to the vital resource. There are only a limited number of frequencies capable of carrying cellular signals.
"A large incumbent may benefit from acquiring spectrum even if its uses of the spectrum are not the most efficient if that acquisition helps preserve high prices," the department wrote in the document, which was signed by division chief William Baer.
The Justice Department argued that unless there is compelling evidence that one of the large carriers is already using all of its existing spectrum efficiently, the public would benefit the most from allowing one of the smaller carriers to buy the rights to the frequencies.
"The Department would normally expect the highest use value for new spectrum that is in the public interest to come from rivals to the leading firms that could effectively make use of additional spectrum to expand capacity, improve coverage, or introduce new services in an effort to challenge the dominant firms," the agency wrote.
The officials emphasized that low-frequency spectrum is particularly important because it can carry signals farther and travel through walls.
"The Department concludes that rules that ensure the smaller nationwide networks, which currently lack substantial low-frequency spectrum, have an opportunity to acquire such spectrum could improve the competitive dynamic among nationwide carriers and benefit consumers," the department wrote.
The agency concluded that "rules, weights, or caps" could be justified to block Verizon and AT&T from buying up all of the TV spectrum at auction.
The filing from the Antitrust Division, the expert agency for competition issues, is a major boost to Sprint and T-Mobile as they battle with AT&T and Verizon over the rules for the upcoming auctions.
“The Justice Department is absolutely right," Larry Krevor, Sprint's vice president of government affairs, said in a statement. "Ensuring that all carriers, large and small, have access to low-band spectrum would improve competition and benefit consumers."
Verizon and AT&T declined to comment.