Verizon, T-Mobile Sign Spectrum Deal, Partly Pending FCC Approval

By Michelle Maisto  |  Posted 2012-06-25 Print this article Print

T-Mobile, complicating its position on Verizon Wireless’ deal with cable companies, has agreed to buy some of the once-cable-owned spectrum from Verizon, as well as trade some spectrum to the benefit of both parties. The spectrum coming from Verizon’s controversial cable deal is awaiting FCC and DOJ approval.

T-Mobile and Verizon Wireless have entered into an agreement in which T-Mobile will purchase some Advanced Wireless Services spectrum from Verizon, and the pair will also exchange some AWS spectrum licenses, helping each to attain €œmore contiguous blocks of spectrum and realign spectrum in adjacent markets,€ T-Mobile said in a June 25 statement.

T-Mobile said the deal will improve its position in 15 of the top 25 markets and is an addition to the carrier€™s already-announced plan to spend $4 billion to grow its 4G network and roll out Long-Term Evolution (LTE) technology.

€œThis is good for T-Mobile and good for consumers because it will enable T-Mobile to compete even more vigorously with other wireless carriers,€ Philipp Humm, T-Mobile CEO and president, said in the statement. €œWe anticipate FCC approval later this summer, in time for us to incorporate this new spectrum into our network modernization and the rollout of LTE services next year.€

In exchange for cash and spectrum covering 22 million people, T-Mobile will receive spectrum covering 60 million people, most notably in Philadelphia; Washington, D.C.; Detroit; Minneapolis; Seattle; Cleveland; Columbus, Ohio; Milwaukee; Charlotte, Greensboro and Raleigh-Durham, N.C.; Memphis, Tenn; and Rochester, N.Y.

As alluded to by Humm, some of the spectrum T-Mobile will acquire requires approval by both the FCC and the U.S. Department of Justice because it will come to Verizon as part its controversial agreement with cable companies SpectrumCo€”a conglomerate of Time Warner Cable, Comcast and Bright House Networks€”and Cox Wireless. Some of the spectrum will also come from a deal with Leap Wireless.

Verizon€™s deal with the cable companies is contested for facilitating Verizon€™s ownership of what some say is too large a portion of the industry€™s spectrum, as well as for marketing agreements in which the parties will bundle and sell each others€™ offerings, essentially making allies out of competitors. Such a blow to competition, many worry, could leave consumers facing fewer options and higher prices.

€œThe proposed transaction between Verizon and Cable is about far more than spectrum. The deal is a far-reaching non-compete agreement between two huge competitors.  While it's nice that Verizon will cede a small portion of its vast spectrum holdings to T-Mobile, that does nothing to mitigate the fact that Verizon and Cable want to stop competing, stop investing, and stop innovating to the great detriment of consumers and the American economy,€ the Alliance for Broadband Competition said in a June 25 statement.

€œOur position remains the same,€ it added. €œWe urge the DOJ and FCC to continue their thorough examination of these agreements to ensure a competitive telecommunications industry."

The Alliance was launched May 11 and includes representatives from T-Mobile, Sprint and the RCA-The Competitive Carriers Association, as well as from consumer advocacy groups such as Public Knowledge, the Free Press and the American Antitrust Institute.

Sprint, in a statement following an Alliance kickoff call May 14, said:

The cooperative arrangements between these companies encompass wired and wireless technologies, voice, video and data services: the full complement of 21st century electronic communications services and have the potential to touch each consumer and every government, business, health care, and educational institution in the United States.

T-Mobile has also expressed concern about the deal, though more particularly about the Verizon stockpile of unused AWS spectrum that T-Mobile hopes to soon have its hands on. On April 19, Humm met with the chief of the FCC€™s Wireless Telecommunications Bureau, Rick Kaplan, to discuss the spectrum, which has gone unused for six years, according to a letter to FCC from T-Mobile counsel Jean Kiddoo.

While there€™s belief that Verizon is selling off some of its spectrum to reduce its overall portion in a gesture to encourage the FCC to approve its deal with the cable companies, Verizon Communications CFO Fran Shammo, speaking at a JP Morgan conference May 16, said this isn€™t true.

€œI think we have been very good stewards of our spectrum,€ Shammo told JP Morgan€™s Phil Cusick. €œI think we have shown a history there, and we don€™t want to be looked at as hoarding spectrum for the industry. So it is the right thing to do, for us and for the rest of the industry.€

Follow Michelle Maisto on Twitter.

Michelle Maisto has been covering the enterprise mobility space for a decade, beginning with Knowledge Management, Field Force Automation and eCRM, and most recently as the editor-in-chief of Mobile Enterprise magazine. She earned an MFA in nonfiction writing from Columbia University, and in her spare time obsesses about food. Her first book, The Gastronomy of Marriage, if forthcoming from Random House in September 2009.

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