AT&T (News - Alert) now says the rumored spectrum set-asides being considered by the Federal Communications Commission for upcoming auctions of former broadcast TV spectrum are obnoxious enough that AT&T might not even bid.

Ignore for the moment the likelihood that the threat to sit out the auctions is part of an effort to convince the FCC not to follow through with the rules. AT&T argues the proposed rules would limit it, and Verizon (News - Alert), to a single 10 MHz by 10 MHz allocation.

While helpful, that is not so much spectrum that AT&T has to participate in the auction.

AT&T executives have made clear their view that spectrum set asides for the upcoming broadcast TV auctions (700 MHz) will be inefficient, and possibly will imperil the objectives of the auction, which include raising enough money to convince broadcasters to give up their licenses.

To be sure, the logic of reserving assets for smaller competitors is simple to understand. That has been a policy pursued in the past by regulators seeking to encourage new competitors to enter a market.

In this case, the set-asides would be intended to prevent the two largest U.S. mobile service providers from acquiring all the available spectrum.

AT&T executives also argue that restricting the amount of spectrum it can bid on will lead to lower overall revenue raised by the auction, which would imperil the whole process, as broadcasters might simply decide not to sell their licenses.

It is essential, in fact, that broadcasters first vacate their spectrum, something they are likely less willing to do if the money received for giving up spectrum is not high.

Some might also argue that the awarded spectrum will be more efficiently used, resulting in higher amounts of usable bandwidth, if no restrictions are placed on any bidders. That would be the case since bidders could amalgamate new spectrum in larger blocks, leading to more efficiency.