By Shira Ovide
Spectrum, spectrum, spectrum!
- Associated Press
It seems that every other sentence out of the mouths of AT&T executives in the past 24 hours starts or ends with wireless spectrum — the government-controlled airwaves that companies license to transmit wireless signals.
AT&T says its parcel of existing spectrum can’t keep up with explosive demand, forcing dropped cellphone calls and sluggish wireless Internet service. (Yes, that means you, iPhone users.) AT&T says its proposed $39 billion purchase of T-Mobile will help the company and its data-demanding mobile customers.
To explain what the fuss is all about, Deal Journal talked with Kevin Werbach, a professor at the University of Pennsylvania’s Wharton School and founder of technology consulting firm Supernova Group. He explains why spectrum matters, and whether this proposed merger will help mobile service for Americans. Here’s our exchange:
Deal Journal: What is spectrum, and why is it important for users of mobile devices?
Kevin Werbach: Spectrum means wireless capacity. Wireless carriers have licenses from the FCC to transmit on certain frequencies. Because there are only so many usable frequencies and things aren’t organized in the most efficient way, access to spectrum is a limiting factor for wireless services. Insufficient spectrum limits a carrier’s coverage, service quality, and data connection speeds.
DJ: There are different bands or kinds of spectrum, right? Which ones are we talking about in this deal?
KW: There are many different frequency bands, and some spectrum is shared on an “unlicensed” basis (think WiFi). Both AT&T and T-Mobile have a variety of spectrum licenses, but T-Mobile’s most significant asset for this deal is the so-called AWS spectrum in the 1700 megahertz range. AT&T hopes to use that to supplement its own spectrum for fourth-generation wireless service (4G), which will offer faster data rates for wireless broadband.
DJ: If this merger goes through, doesn’t this just shift T-Mobile’s spectrum to AT&T’s? It doesn’t seem to improve the country’s wireless network situation overall.
KW: If the merger goes through, AT&T acquires T-Mobile’s licenses, minus anything it has to divest to satisfy antitrust review. The deal doesn’t put any more spectrum into wireless broadband overall. However, AT&T could use the combined spectrum more efficiently to improve its own service. It’s particularly valuable in markets such as New York and San Francisco where AT&T is very spectrum constrained today, and for the 4G rollout. And AT&T would have access to more cellular antenna towers, which are sometimes more of a bottleneck than the spectrum. On the other hand, the deal would reduce the number of wireless competitors, which is a serious concern.
DJ: What are the government and telecom companies doing already to improve phone call quality and mobile Internet speed? What do they need to do better? [Note: Werbach advised the Obama administration's transition team on the FCC following the 2008 elections.]
KW: The Obama Administration is seeking to reallocate 500 megahertz from other uses such as government systems and over-the-air television broadcasts to wireless broadband over the next 10 years. This is a tremendously important initiative that hasn’t received enough attention. Demand is skyrocketing, and we need more capacity to support the wireless data services of the future.
The FCC has a proposal for “incentive auctions” that would be a win-win-win for the broadcasters, wireless operators, and the US Treasury, but it requires Congressional action. And the FCC should continue to push for more unlicensed wireless capacity, which benefits from being shared. As for the what carriers are doing, we just saw it. The T-Mobile deal is AT&T’s big play to improve its network. It’s no secret that AT&T’s wireless service is widely seen as inferior to Verizon’s.
DJ: What wireless service do you have for yourself?
KW: I’ve used most of them at one time or another, but I’m a contrarian by nature. I went to the Verizon Wireless store and traded in my AT&T iPhone for a Verizon DroidX the night before Verizon’s iPhone launch.
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