16
Aug
verizonwirelesslogo

The US Department of Justice approved a sale of unused wireless spectrum to Verizon today, marking one of the largest spectrum sales to a single corporate entity in history. The unused portion of the AWS spectrum is owned by a number of cable companies (known collectively as "SpectrumCo") that bought it during the FCC AWS auction back in 2008.

Of course, back in the old spectrum heydays of, uh, four very long years ago, those megahertz were a lot cheaper. In fact, $1.3 billion cheaper. The cable company axis of evil consortium purchased the AWS blocks for a comparatively paltry $2.3 billion at the time. Pocket change! Here's a map of what they bought:

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While big cable's intentions with the spectrum when it made the purchase weren't clear (after all, who questions TV providers buying wireless airspace?), the sale obviously netted them a rather convenient and tidy profit. Not only that, but those cable companies are getting a big deal-sweetener in the form of Verizon offering access to its wireless network at wholesale price. Yes, that means your cable company can start selling you wireless service (probably for connected devices) as part of your Triple Play Choice Select 500 Platinum (TM) bundletastrophe. Oh, joy of joys.

In exchange for getting over anti-trust hurdles, though, Verizon and SpectrumCo agreed to a few limitations in regards to their proposed cross-service agreements. One part of that agreement makes Verizon the exclusive wireless service provider to these cable companies. That means they can't buy wireless service from other carriers like AT&T or T-Mobile. The DoJ saw fit to have this part of the agreement extend "only" until 2016. And that's probably just enough time for Verizon's network to become so expansive that it'd be the only practical option for such a cross-service arrangement.

Other limitations basically prevent Verizon from sandbagging its own FiOS cable and wired internet services in markets that SpectrumCo members dominate, in order to promote competition. Don't worry, it starts sounding even more devious the further you dig.

The T-Mobile Spectrum Swap

Most outlets have described the other big contingent part of this spectrum sale as an agreement for Verizon to sell T-Mobile some of its unused spectrum. That isn't strictly true, though. Actually, it's much more a spectrum trade (relatively little money will change hands - there's a great explanation of it here).

Verizon will be handing over a bunch of various snippets of spectrum in numerous regions that will serve to "harmonize" T-Mobile's network, allowing it to operate more smoothly and efficiently on some of the various frequencies it uses. Essentially, this will expand T-Mobile's capacity and increase the consistency of service. Verizon is getting off cheap, here - the AWS spectrum it's giving T-Mobile is basically incompatible with its existing network architecture.

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T-Mobile is also giving Verizon bits and pieces from its own spectrum bank, that similarly fill holes in Verizon's AWS network. If you take a look here, you'll see Verizon's current AWS coverage is pretty limited to the eastern US. The spectrum it's getting from T-Mobile is almost exclusively in the western half of the country.

T-Mobile, though, is definitely getting something of major value here. Its AWS network is a jumbled mess, and this swap will allow T-Mobile to move on with its LTE rollout more quickly and cheaply, by reducing the need for spectrum "refarming" (re-allocating already-used spectrum for new network technology). Instead, it will be able to do a lot more building on top of its existing AWS network.

Verizon's network will also be harmonized by the deal, as the AWS spectrum T-Mobile is providing fits in neatly with the spectrum Verizon is buying from SpectrumCo, as well as some it already owns. All coming together now, right?

The AWS Spectrum And LTE / LTE Advanced

Verizon already controls a very substantial block of the 700MHz wireless spectrum, which it uses for LTE. They also have what is inarguably the US's best 4G network when evaluated on a national scale. That network covers more people by far than any other, and if you were to do an average speed comparison over 100 random points on a map, it'd almost certainly come out as the fastest, too.

4G-LTE-LogoAT&T is playing catch-up, but to say T-Mobile or Sprint have a snowball's chance in hell of ever competing with Verizon's data network on a national level is lunacy. It's just not going to happen without major policy changes and freeing of additional, cheaper spectrum.

Today's deal takes Verizon's advantage and essentially doubles it. The AWS "paired block" (a paired block means less interference between towers and handsets) it has received as part of the SpectrumCo sale is totally unoccupied, unused airspace for Verizon to deploy its network on. While AT&T and friends are forced to refarm, Verizon can start from a clean slate. This makes deploying a network cheaper and faster, and also generally means a better quality of service across the board.

Exactly what Verizon will use this AWS spectrum for is up in the air at the moment. Could it be the groundwork for an LTE Advanced network (ugh, please don't call it 5G)? Or is Verizon just playing hoarder and taking the spectrum ball away from everyone else on the carrier playground?

The End Game?

I suspect Verizon has big plans for this new spectrum. Its collusion with the Cable Cartel agreement with SpectrumCo members suggests that Verizon intends to become the go-to source of wholesale wireless service in the US. That's a massive potential market, and if Verizon continues aggressively expanding its data network footprint (as it has since, well, ever), there's little chance even AT&T will be able to provide it competition in this area.

While Verizon's continued aggregation of wireless airspace probably means ever faster, more complete coverage for customers, it also highlights a growing problem with the wireless industry in the US: a decided lack of competition. Until the US government begins freeing up more of its often very inefficiently or non-utilized spectrum, this problem is only going to get worse. Companies like Sprint and T-Mobile will simply fall further and further behind.

I'm all for competition in the market, but spectrum is to wireless service what irrigated waterways are to farming: necessary for growth, and finite. If someone's hoarding all the water, and the government is slow to turn the spigot, it's difficult to see how competition can spring up.

Whether or not that's a good or a bad thing for consumers in the end, well, I'll leave that for you to decide. 

David Ruddock
David's phone is an HTC One. He is an avid writer, and enjoys playing devil's advocate in editorials, imparting a legal perspective on tech news, and reviewing the latest phones and gadgets. He also doesn't usually write such boring sentences.

  • http://www.facebook.com/troop.threeninetwo Troop Threeninetwo

    shady deal for sure.....block T mo AT&T and then let this go threw? interesting.

    • leoingle

      Exactly what I was thinking.

      • David Keith

        If Sprint or T-Mo or AT&T got this approved it wouldn't be that big of a deal, but since it is Verizon its 10 times worse... why?

        • leoingle

          Says who???

        • squiddy20

          Because Verizon already has THE largest network of the 4, and this deal only gives them that much more expansion options. Sprint or T-Mobile need the spectrum most. They are the smallest carriers in terms of subscribers and wireless footprint.
          Heck, if you're on Sprint and roaming, chances are you're roaming on Verizon's network. Why should Verizon get MORE spectrum for MORE coverage?

          • wrlsgru

            sprint has plenty of spectrum with clear wire. they will be fine.

          • squiddy20

            If that's true, then why does Sprint have to disassemble it's iDen network for reuse as LTE? Surely if it had "plenty of spectrum with clear wire", it wouldn't be forced to take such a measure, yes?

          • ramblinman

            maybe because IDEN is old technology? Why keep it around?

          • http://profile.yahoo.com/52RMHX6AKKSZ75OKTJYQQWLRVU DCMAKER

            because it is i think 2500mhz??? that is too high of a freq because it has no building penetration and does not travel far. 700-800mhz band has better range and building penetration. Clearwire may have the ability to have close to 1Gbps speeds in spectrum but it is crappy spectrum. They have to use more towers and more power to do the same amount of coverage. plus it'll only work outside not in a building.

          • http://www.facebook.com/Shinakuma George Millhouse

            ROFL !!!!

          • http://www.facebook.com/Shinakuma George Millhouse

            because thats business?

    • Kurt

      My thoughts exactly. AT&T buying T-Mobile was the work of the devil and going to bring about the apocalypse or something, but this is all just peachy?

    • Lou

      FCC and DOJ choked on the whistle with ATT/TMO and then realized if they blocked two big deals in a row it would send a message to the industry that nobody was allowed to to do any deals any more. At that point, queue up the calls of "business-hating, socialist democrats..." Politically they had to let this go through. The fact that it helps TMO, their current darling, made it too sweet to pass up.

    • http://codytoombs.wordpress.com/ Cody Toombs

      I think the reason AT&T and T-Mobile weren't allowed to merge is that it meant AT&T would have both removed a competitor and would also have collected a potentially overwhelming mass of customers into a single pot. This deal for Verizon doesn't technically remove any competitor and it doesn't grow their customer base. In fact, if taken only for it's parts, it simply looks like Verizon is just making their spectrum more efficient and nothing else. Put simply, you could measure (and easily demonize) the effect of the AT&T and T-Mobile deal, but the Verizon deal had no clearly calculable results on the industry. If it's not clear that this is handicapping competitors, then it's pretty hard to take a stand against it.

  • http://twitter.com/yellowspyder Spyder Ryder

    crap... and the most expensive of the four carriers... it's going to force everyone into a very expensive plan, or have no data with the other carriers. I smell a monopoly.

  • CJ Walker

    So what you're saying is that a true unlimited data plan shouldn't be too hard for Verizon to handle? Because as it is, I don't care if you've got the fastest network in the entire galaxy it's not going to mean much to users like me if I get throttled after 2 gigs.

    • http://www.facebook.com/Shinakuma George Millhouse

      um Verizion doesnt throttle

      • William_Morris

        No, they just charge you out the backside if you go over your purchased "allotment."

        This is part of the reason why I will only ever purchase phones off contract from now on. I have an unlimited plan and it will remain that way. I'm not paying more for less. That's not what I signed on for.

  • Havoc70

    Not surprising for the biggest ripoff company in Wireless services. Be prepared for more of VZ sticking to their customers

  • http://profiles.google.com/mechanizedapathy Shawn Brandel

    They will call the LTE-A network 4GS, and give you a granny smith Apple in case you didn't already have a sour taste in your mouth from the name.

  • Fifth313ment

    As Americans we all own this, and all other, spectrum and as a collective and I say we should have a vote on what happen to it. I can't believe this is going through as this makes the ATT/T-Mobile deal look like real competition!

    • Lou

      How does that make sense? ATT/TMO would have resulted in one less wireless company. Here, the cable companies were just sitting on this spectrum with no intention of using it. I get people's points about letting VZW hoard all the spectrum, but at least here there are no fewer competitors at the end of the day.

      To be clear: I am a fan of both deals. I say, let the boys play.

  • RBI411

    Its obviously bad for this much spectrum to be tied up into one company, but its certainly better than having all this spectrum being completely unused. If you don't use what you've got it should be forfeited back to the FCC to be reauctioned off.

  • Jeff Dunn

    If the AT&T/T-Mobile deal had gone through this wouldn't be such a big deal, but as it stands it looks mighty fishy from a consumers point of view. The problem with the aforementioned deal was that politicians got involved, and that is never a good thing for free market or capitalism. The AT&T-Mobile deal should have gone through with as little investigation as the Verizon deal did, but over politicization from the suits in Washington (Who are kind of naive in the technology department) decided to play with the American businesses again. Don't they have banks or large car companies to bail out or something?

  • chrisbramm

    For all we complain in the UK about the speed of the coming 4G auction and rollout at least it does seem fairer and a lot more likely to spark some competition from Everything Everywhere/O2/Vodaphone

  • Matthew Fry

    I thought SpectrumCo was Sprint? Why would Sprint sell this off?

  • Matthew

    Hopefully the other carriers like T-Mobile and Sprint can survive to create some sort of competition. Verizon and At&t are just getting way to expensive.