ATandTs Bargain-Basement Spectrum Deal
ATandT Preparing for Major Wireless Spectrum Shift Within Five Years
In a pair of moves over the past two days, telecom giant AT&T has taken steps to gather the necessary spectrum to build out the Long-Term Evolution (LTE) network it needs over the next five years.
On Aug. 2, AT&T agreed to acquire NextWave Wireless, a failing carrier with spectrum that the Federal Communications Commission has been trying to repurpose for years. Then on Aug. 3, AT&T announced that it would phase out its 2G data network by the beginning of 2017.
In an email, an AT&T spokesperson told eWEEK, To help support the explosion of mobile Internet usage and give our customers a great experience, we plan to fully discontinue service on our 2G wireless networks by approximately Jan. 1, 2017. This will enable us to free up spectrum for added capacity on our mobile Internet network.
The spokesperson said AT&T will be working with customers who are still using 2G services to provide options that will meet their needs. AT&T has relatively few customers who currently depend on 2G data, and that number is expected to diminish through attrition by 2017. AT&T no longer sells 2G devices.
By freeing up 2G spectrum, AT&T will have more space available for LTE, in much the same way that Sprint is phasing out its iDEN spectrum so it has room for LTE. Currently, its unclear which of its services AT&T considers 2G and plans to shut down.
GSM, which is what AT&T uses for its voice technology is the international standard and is used throughout the world, is technically a 2G standard, but the 2G data standard that AT&T uses is General Packet Radio Service (GPRS), which is not widely used although it is widely available on the AT&T network.
EDGE communications are considered 3G, and apparently not in AT&Ts plans for shutdown. Likewise AT&Ts Evolved High-Speed Packet Access (HSPA+) and LTE networks are considered 3G and 4G and would not be shut down on this plan. Questions to the AT&T spokesperson did not provide details as to what services in AT&Ts spectrum are planned for shutdown when support for 2G ends.
The plans for the NexWave LTE spectrum are also a ways off. While NextWave is in dire financial straits, the use of its spectrum for LTE data services has yet to be approved by the FCC. However, the owner of the adjacent spectrum, Sirius XM and AT&T filed a joint proposal that would clear up a number of engineering issues and as a result would open the 2.3GHz Wireless Communications Service (WCS) to use as an LTE data band. The FCC filing outlined a number of limitations on WCS operations that would prevent AT&Ts WCS operations from interfering with Sirius XMs audio services.
ATandTs Bargain-Basement Spectrum Deal
AT&T bought NextWave at the bargain-basement price of $25 million, plus a contingent payment of about $25 million plus cash and other assets to pay off NextWaves debt, for a total of $600 million. NextWave originally bought the WCS spectrum in 1997, but was involved in a protracted legal battle with the FCC after NextWave declared bankruptcy and defaulted on its payment for the spectrum. NextWave got the rights to the spectrum in 2004, but has been unable to use the spectrum because of the potential for interference with Sirius XM.
By working with Sirius XM, AT&T was able to work out an engineering agreement that satisfied Sirius XM, which led to the joint proposal between the two companies. However, the FCC is still considering the proposal, and once its accepted by the agency, the deal may be subject to approval by the U.S. Department of Justice and the Federal Trade Commission. However, considering how long the government has been trying to wrest control of the WCS spectrum from NextWave, its hard to see how the government is going to put up much of a fight.
AT&T has said that the company expects the FCC to take about three years to finalize the approval process. But considering that the FCC would clearly like to have some company besides NextWave handling the WCS band and considering that the adjacent spectrum holder and AT&T have proposed a joint solution, the only delay is likely to be the FCCs technical evaluation of the proposal. If the FCC staff is satisfied that its workable, then there shouldnt be any roadblocks.
Its also unlikely that the DOJ or the FTC will stand in the way of the deal. NextWave is struggling to stay afloat and will never be in a position to use the WCS band for any sort of wireless. Because NextWave has no wireless customers, AT&T cant be seen as gaining unfair market share. In short, its a deal that makes good sense and puts good spectrum to work.
By handing the spectrum planning in the way that it did, AT&T has demonstrated that it can do what another company planning to offer LTE on a frequency adjacent to satellite operations should have done. Had LightSquared tackled the engineering problems first, and acknowledged that the GPS operators needed to be protected, that company might be operating today. But it didnt and its not. The AT&T proposal, by contrast, looks like it will sail right through the process.