The FCC is currently drafting rules for how to structure the auction, which is expected to produce billions of dollars in revenue for the government to pay for a nationwide wireless network for first responders and to reduce the federal debt.
The Justice Department has recommended that the FCC use limits or caps to ensure that Verizon and AT&T do not dominate the auction and stifle competition in the industry.
In a filing with the FCC in June, T-Mobile pitched its own proposal for the auction that it said would promote competition while ensuring that the government raises enough revenue.
Under T-Mobile's plan, the FCC would cap the amount of spectrum that any single carrier could buy as long as the auction hits its revenue target. If the caps prevent the government from meeting the revenue target, the limit would be gradually rolled back.
The limits in T-Mobile's plan would apply to carriers that hold more than a third of the spectrum in low-frequency bands. Low-frequency spectrum is particularly valuable because it can carry signals for longer distances and through walls.
But AT&T argues that T-Mobile overstates the importance of low-frequency spectrum, and that what matters now is overall network capacity.
"Carriers deploying low band and high band spectrum alike must squeeze as many cell sites as they can into their networks to meet exploding demand for data services," Marsh wrote in the blog post.
Citing a study by AT&T economists, Marsh argued that T-Mobile's caps would discourage many carriers from even bidding for spectrum in certain markets. She claimed that T-Mobile's "redo" proposal would "do little" to solve the problem.
"T-Mobile’s proposal also would create incentives and opportunities for manipulation that would not otherwise exist, and add enormous and potentially crippling complexity to an already complex and uncertain auction mechanism," she wrote.
Marsh argued that an unrestricted auction would produce the most revenue for the government, ensuring that there are enough funds to build the public safety network.
In an emailed statement, Kathleen Ham, a T-Mobile vice president, argued that without "competitive safeguards" there won't be anything to prevent AT&T and Verizon from winning all of the low-band spectrum at auction.
"Such an outcome would be bad for consumers and bad for competition in the wireless broadband marketplace," she said. "The two dominant carriers already control near eighty percent of low-band spectrum. Reasonable spectrum concentration limits at auction, combined with sound auction-design features such as the Dynamic Market Rule, will promote competition, encourage innovation and increase consumer choice, without harming auction revenue.”
—Updated with a comment from T-Mobile at 6:14 p.m.