AT&T is hopping mad that the Federal Communications Commission wants to give smaller carriers a more favorable shot at buying broadcast TV spectrum that will be shifted to the cellular industry.

The airwaves in the 600MHz band are set to be auctioned next year, and the FCC seems to be leaning toward putting restrictions on the biggest carriers. The restrictions could limit the amount of money the auction takes in but help prevent AT&T and Verizon from further dominating the US wireless market.

AT&T pulling out of the auction could be good for its rivals, but would make the spectrum sales less lucrative for the government and TV broadcasters.

"AT&T could either participate in the auction, accepting that it will likely obtain only a fragmented and inefficient 600MHz footprint, or it can choose to withhold its capital for other investments and sit out of the auction entirely," AT&T VP Joan Marsh wrote to the FCC. "AT&T has never declined to participate in a major spectrum auction and certainly did not intend to do so here, where capital contributions will be needed across the wireless industry for a successful outcome. But if the restrictions as proposed are adopted, AT&T will need to seriously consider whether its capital and resources are directed toward other spectrum opportunities that will better enable AT&T to continue to support high quality LTE network deployments to serve its customers."

You can read AT&T's letter here, courtesy of FierceWireless. A FierceWireless story notes that restrictions under consideration could mean that when "auction bidding hits an as-of-yet unknown threshold in a given market, the FCC would set aside up to 30MHz of spectrum in that market. Companies that hold at least one-third of the low-band spectrum in that market then wouldn't be allowed to bid on the 30MHz of spectrum that has been set aside."

The restrictions could affect AT&T in 70 percent of the country, Marsh wrote.

"In short, in all band plans less than 70MHz, restricted bidders—specifically AT&T and Verizon (and in a small number of markets, potentially US Cellular or CSpire)—would be limited to bidding for only three blocks," she wrote. "And in each market where the restrictions attach to at least two carriers, at most only one restricted carrier could emerge from the auction with a 10x10 MHz allocation."

A 10x10 MHz allocation (10MHz for uplink and 10MHz for downlink) is the minimum needed for economic and technical reasons, AT&T said. "The auction restrictions as proposed make it a virtual certainty that, for many proposed band plans, either AT&T or Verizon or both would be limited by the auction restrictions to a fragmented, uneconomic, and inefficient 600MHz footprint," the company said.

Verizon last week urged the FCC not to give T-Mobile favorable treatment, although T-Mobile is the smallest of the four major national carriers.

"T-Mobile is an established nationwide incumbent with a large, multinational parent and a demonstrated ability to acquire the spectrum it needs," Verizon said. "For example, T-Mobile recently entered into an agreement with Verizon to acquire what it describes as a 'huge swath' of low-frequency spectrum covering 70 percent of its customers. And the last time T-Mobile chose to participate in an auction, it dominated the bidding—spending $4.2 billion and acquiring more spectrum than Verizon and AT&T combined."

That auction Verizon referred to occurred in 2006.

Sprint has offered its own proposal for the auction, but we're still waiting for the FCC to make its intentions official. The auction is scheduled to happen in mid-2015, although getting the broadcasters on board is another challenge.

The auction will affect more than just the big four carriers. The Rural Wireless Association last week told the FCC that it opposes a proposal by Verizon "because it is a clear attempt to tip the scales further in favor of the large national carriers by making it difficult (if not impossible) for small and rural wireless carriers to participate in the 600MHz spectrum auction."