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Verizon and AT&T also look to battle T-Mobile and rural television providers in push for new spectrum auction

Verizon Wireless, a joint venture between Verizon Communications Inc. (VZ) and Vodafone Group Plc. (LON:VOD), is not one to shy from controversy.  Now it has dived right into another.

I. T-Mobile

The company, along with SpectrumCo -- a joint venture between Time Warner Cable Inc. (TWC), Comcast Corp. (CMCSA), and Bright House Networks -- wrote a filing to the U.S. Federal Communications Commission, begging them to approve a major spectrum sale.

In the document Verizon Wireless claims that it may run out of spectrum "in some areas" of the U.S. by as early as next year -- 2013.  The carrier predicts that its holdings will be almost completely exhausted by as early as 2015.  

The proposed remedy is the sale of SpectrumCo's so-called AWS ("advanced wireless services") spectrum for $3.6B USD (Comcast gets $2.3B USD, TWC pockets $1.1B USD, and Bright House earns $189M USD).

The heavily redacted document offers scant clues as to how Verizon Wireless came to these predictions.  However, Verizon Wireless is deploying new spectrum-hungry LTE at a rapid pace, with its network currently covering an industry-leading 200+ million Americans.

Verizon Lightning
Verizon Wireless warns that spectrum shortages may kill its LTE thunder.
[Image Source: Verizon]

The document hints that Verizon Wireless plans to combat shortage with LTE femtocells -- a similar technique to that used by rival AT&T, Inc. (T) to shore up its deficient 3G network in urban areas.  Verizon Wireless also cited plans to repurpose CDMA 1x spectrum for LTE use.

Verizon has tried to scale back demand by increasing its data fees to the highest in the industry for data.  However, it relented during the holidays, offering "double data" contracts, effectively offering the cheapest rates in the industry.

Some smaller carriers like Deutsche Telekom AG's (ETR:DTE) T-Mobile USA have sought to block the large sale, fearful that it would create a winner takes all atmosphere, or in T-Mobile's words an "excessive concentration" of spectrum.  Indeed, Verizon Wireless' current spectrum holdings are thought to grossly exceed those of third and fourth largest mobile carriers Sprint Nextel Corp. (S) and T-Mobile USA.

Still, the FCC may have troubled denying Verizon.  After all, it just approved AT&T's acquisition of a block of unused spectrum from Qualcomm, Inc. (QCOM).

II. Spectrum Auction Battle Also Looms

Regardless of the outcome in the proposed AWS purchase, both Verizon Wireless and AT&T are also pushing hard for the approval of President Obama's proposed spectrum repurposing auction.  The proposed auction is currently stalled, as it lacks the Congressional authorization to go forward, amid a partisan stalemate that's affecting a broad host of issues.

The issue at hand is that some television providers who bought spectrum licenses are now sitting on unused spectrum after the transition to digital television.  The proposal by the Obama administration is to allow these companies to voluntarily sell their spectrum in a special FCC auction.  The FCC would keep a cut of the proceeds, allowing it to deliver a nationwide emergency response network and begin national broadband efforts.  The rest of the proceeds would go to the licensee.

Auction wide
AT&T and Verizon are fighting to convince Congress to authorize a special spectrum (re)auction.
[Image Source: Oscar Hidalgo for The New York Times]

While many television broadcasters support the auction and salivate at the prospective revenue, others are trying to block their peers' right to sell.  They cite interference concerns, despite the Obama administration's insistence that this is a non-issue from a technical standpoint.

The proposed auction will likely see similar opposition from smaller carriers like T-Mobile who fear that it will give AT&T and Verizon and opportunity to gobble up more spectrum -- and more market share, as a result.

Sources: The Verge, Greenville Online

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Is selling spectrum the best option?
By HoosierEngineer5 on 3/7/2012 8:15:56 AM , Rating: 2
Neither Verizon nor AT&T know how to effectively use the spectrum they have. Making it an auction causes a feeding frenzy based on the hope of market domination by eliminating competitors. Spectrum allocation should be based on who best is the customer's needs (in terms of data rate, cost, and availability).

Right now, everybody but the consumer is getting a bite of the spectrum auction, and the consumer has no say.

RE: Is selling spectrum the best option?
By tekzor on 3/7/2012 10:30:33 AM , Rating: 2
I think its safe to say that there is something wrong with the way the USA handles the wireless spectrum

By NellyFromMA on 3/7/2012 1:09:15 PM , Rating: 2
And the telecommunications industry as a whole.

By Samus on 3/7/2012 1:20:44 PM , Rating: 2
In other countries, the government licenses spectrum, and it can be shared between carriers.

Probably explains why the rest of the world has superior cellular networks for less money than the United States.

RE: Is selling spectrum the best option?
By JohnThacker on 3/7/2012 12:06:35 PM , Rating: 2
Selling spectrum is definitely the best option.

If you think companies sit on spectrum now, you should see how they sat on spectrum when it was simply given to them for free based on political considerations and the promises that they be the best for the customer's needs.

Verizon and AT&T are using their spectrum. The companies that are really doing nothing with it are the old TV broadcasters that got theirs (both a long time ago and grandfathered in) through the exact process that you're advocating. Or rather, what actually happens when the process you're advocating gets adopted, instead of your ideal.

The alternative to auctions is pure politics. I'd rather have Verizon and AT&T pay money to the Treasury and the people as a whole than pay money to the re-election campaigns of influential politicians.

RE: Is selling spectrum the best option?
By HoosierEngineer5 on 3/7/2012 3:59:59 PM , Rating: 2
Although it is an unfair comparison (since TV is ad-supported), I don't pay ANYTHING (directly) for terrestrial broadcast television. Wouldn't it be neat if we could do the same for bits and bytes?

By JohnThacker on 3/7/2012 9:33:33 PM , Rating: 2
I can imagine something that does ad-supported free Internet already-- NetZero is, amazingly, still around. It's not too hard to imagine that model expanding, but it seems like most people (like with cable TV) would rather pay.

That "directly" is an important caveat. We all pay quite a bit by, for example, having all that useful spectrum sitting their unused, given away to the TV companies.

You can also do some interesting things with a Kindle (especially the older ones) and only pay up front one cost that's less than the cost of buying a TV.

Rolls eyes
By mcnabney on 3/7/2012 9:51:16 AM , Rating: 2
You really don't think companies like AT&T and Verizon that each serve over 100M customers might need a tad bit more spectrum than T-mobile (1/3 the customers) and Sprint (about half the customers)? Not to mention that they are the ones deploying LTE and need more mhz to provide that increased capacity.

The whining might have more to do with the fact that T-mobile has neglected to buy any more spectrum in the last two auctions and now is worried that they will get outbid when the next auction comes around. I think I'll remember that strategy at the next auction I go to. Complaining about the rich collector that buys a lot will surely help guarantee that I am the high bidder.

Oh, and FYI for those that don't know. If a company purchases a spectrum lease and DOESN'T develop it they will actually lose it and it will get sold again.

RE: Rolls eyes
By Omega215D on 3/7/2012 11:50:20 AM , Rating: 2
Verizon also shares its network with smaller carriers as well as Sprint. T-Mobile had a long time to expand but their coverage map hasn't changed much from when I had them back in 2003 - 2006.

By JohnThacker on 3/7/2012 12:01:55 PM , Rating: 2
Your links to the auction being stalled are one and two years old. The auction authorization was included in the payroll tax cut and unemployment extension as a method of paying for some of it. The FCC may not be thrilled with all the details, but it implements the 2010 proposal mentioned.

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