Technology: The right way to gain spectrum?
Finally getting the hint from the feds, AT&T announcedMonday that it was dropping its $39 billion bid to buy T-Mobile. That leaves AT&T stuck with the status quo, which in some major cities means a frustrating amount of congestion and dropped calls. Meanwhile, rival Verizon Wireless has been gobbling up the wireless frequencies leased but not developed by the major U.S. cable TV operators. Those airwaves should provide the company plenty of roomto expand capacity as smartphone users multiply and traffic booms.
Thus, one of the country's leading wireless players appears poised to buy its way to greater dominance, but it's not AT&T.
At least one public-interest group is complaining that Verizon's deals are more damaging to consumers than AT&T's long-shot takeover of T-Mobile, but there's a critical difference: While AT&T sought to buy an actual competitor, Verizon is trying to take out a potential one. Regulators haven't been especially aggressive in blocking the former, but they've been even more reluctant to block the latter.
At issue is the spectrum that cable operators leased in 2006, when the Federal Communications Commission auctioned off licenses for "advanced wireless services." These airwavesflank the frequency band used for 3G mobile data traffic, and as the AnandTech blog pointed out this month, they can also support 4G services.
Large swaths of the AWS band were leased by the five largest mobile-phone carriers. But the country's biggest cable TV operators, which banded together to bid for spectrum, were able to lease enough licenses to stitch together a national network. The cable operators said at the time that they weren't planning to launch a mobile-phone company to compete with the likes of Verizon and AT&T. Instead, they said the purchase gave them "flexibility and strategic options."
The airwaves grew in value over the following five years, but the licenses remained unused. This month, Verizon announced a pair of deals to buy the licenses held by various members of the cable operators' consortium -- firstwith Comcast, Time Warner Cable and Bright House Networks, then with Cox, which had launched a mobile-phone service only to start phasing it out earlier this year. (The deals netted cable operators more than $1 billion in profit, a nice "strategic option.") It also announced a swapwith Leap Wireless to exchange some of Verizon's turf in the 700 Mhz band for some of Leap's AWS licenses.
The cable companies plan to market Verizon's wireless service, and Verizon has agreed to market their video services. The joint marketing arrangement strongly suggests that Verizon won't be expanding its own pay-TV offering, FiOS TV, any time soon.
This prospect worries Andrew Jay Schwartzman, policy director for the Media Access Project public interest group. After the Cox deal was announced, Schwartzman said:
Cox Communications now has joined the other large cable operators in a deal that insures that Verizon and the cable industry will stop competing with each other. It is clear Verizon will stop building out its FiOS video service. From here on out, cable won’t do wireless, and Verizon won’t do video. This new cartel means higher prices and less competition. The cease-fire is more important to consumers than the proposed AT&T/T-Mobile transaction because it is much more likely to happen.
A more benign possibility is that Verizon is just more comfortable selling communications services than content services. Either way, though, its decision to partner with cable companies instead of the two sides competing with each other is disappointing for consumers, even if it may translate into zippier mobile data services in the short run.
-- Jon Healey
Credit: Malcolm Linton / Bloomberg News