Verizon Wireless may have some trouble closing the complex spectrum deal it has been trying to get through the Federal Communications Commission since last year. The deal involves an agreement by Verizon Wireless to buy unused AWS spectrum from cable companies, including Cox Communications and Comcast. In return, Verizon Wireless is proposing to offer its 700MHz A and B bands for sale to other carriers.
Currently, Verizon Wireless uses its 700MHz block C spectrum for Long-Term Evolution (LTE). However, the company said that it wants to add AWS spectrum to that mix. Not surprisingly, there are opponents. The Rural Cellular Association and T-Mobile have both filed Petitions to Deny the Verizon Wireless application. But they’re not alone. A number of other advocacy organizations, most notably Consumers Union, have also objected to the planned Verizon Wireless spectrum buy.
Then on April 19, T-Mobile CEO Philipp Humm and his legal team met with the FCC’s chief of the Wireless Telecommunications Bureau, Rick Kaplan, at T-Mobile’s headquarters in Bellevue, Wash., to explain their concerns. The meeting, described in an ex parte letter in the FCC’s files, says that Verizon Wireless doesn’t need the AWS spectrum that the company plans to buy from the cable companies because Verizon Wireless isn’t using the AWS spectrum it already has.
“In particular, the T-Mobile Representatives discussed the fact that, unlike T-Mobile and other wireless carriers, Verizon Wireless has not used its existing AWS spectrum in any way in the six years it has held the licenses, and that the instant transactions would add even more AWS spectrum to Verizon Wireless’ unused spectrum inventory,” said T-Mobile counsel Jean Kiddoo, in a letter to the FCC.
“They noted that given this dismal track record on utilization of its current AWS spectrum, it would make no sense, and would be inconsistent with the Commission’s charge to ensure that spectrum transfers serve the public interest, to allow Verizon to acquire additional AWS licenses, especially at this time of an industry-wide spectrum crunch,” the letter said.
T-Mobile’s Tom Sugrue, senior vice president for government affairs, explained T-Mobile’s position. “Verizon’s announced plan to sell lower 700 MHz spectrum contingent on approval of its spectrum transaction with the cable companies is a tactical ploy designed to divert attention from its attempt to foreclose competitors from being able to acquire AWS spectrumthe last swath of immediately usable mobile broadband spectrum likely to be available in the near term,” Sugrue said in a prepared statement released to eWEEK. “This proposed sale does not mitigate the competitive harms created by Verizon’s pending transaction with the cable companies that would add to its spectrum warehouse.”
Verizon, T-Mobile Both Have LTE Expansion Plans
T-Mobile explained in its FCC filings that the portion of the 700MHz spectrum that Verizon Wireless is planning to sell is relatively undesirable due to interference from powerful commercial transmitters on nearby frequencies and because of the lack of existing devices able to use those frequencies.
Verizon Wireless, of course, does not agree. In a prepared statement provided to eWEEK, Verizon spokesperson Robin Nicol said, “Verizon Wireless has made a strong case that approval of its spectrum license is in the public interest. This purchase will put unused spectrum into the hands of millions of consumers who will use it for high-quality wireless broadband service on Verizon’s 4G LTE-enabled smartphones, tablets, and other devices.
“The FCC and Obama administration are focused on making more spectrum available for mobile broadband because they understand the benefits that will flow to consumers from more spectrum,” Nicol’s statement said.
According to Nicol, Verizon contends it “is also the most efficient user of spectrum among the carriers. T-Mobile’s arguments ignore these facts and the needs of consumers and instead ask the FCC to second-guess the workings of the private commercial secondary market. That is not the purpose of the FCC’s review.”
To some extent, the real meaning of this clash lies more in what the opposing carriers don’t say, rather than what they express in their statements. Verizon Wireless is right about its greater efficiency in using spectrum. The reason is that the company depends heavily on LTE for its data usage and LTE is more efficient than HSPA+, which is what T-Mobile uses.
However, T-Mobile wants more of the AWS spectrum so the company can launch LTE, which would make the spectrum efficiency argument moot in the next year or two. T-Mobile, meanwhile, has a point in that Verizon Wireless already has AWS spectrum it’s not using and to let the company buy this would simply mean more spectrum in its unused inventory.
So who’s right? That’s hard to say, and with all of the competing opinions out there, it’s not clear we’ll ever find out. But right now there’s enough doubt to go around. The FCC is taking its time to study the issue and it’s fairly clear that Verizon Wireless is worried enough that it’s offering up its 700MHz spectrum holdings on its own. Usually this is the sort of thing demanded by the FCC, but Verizon Wireless is doing it pre-emptively.
As to how this will turn out, I can see two likely outcomes. The first is that the FCC will simply not approve the transfer and let the AWS spectrum get sold to other carriers. The second is that the FCC will approve a partial sale and let another carrier, probably T-Mobile, have the other part. That would make both carriers equally unhappy, but it might give a little more flexibility to the spectrum crunch.