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

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.€

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