Verizon Wireless on Friday announced a $3.6 billion deal to purchase more than 100 spectrum licenses from three of the nation's top cable providers, a move that comes as rival AT&T is pumping its cash into its troubled bid for T-Mobile.
Verizon Wireless will purchase 122 Advanced Wireless Systems (AWS) spectrum licenses from SpectrumCo, LLC, a joint effort from Comcast, Time Warner Cable, and Bright House Networks.
Comcast owns 63.6 percent of SpectrumCo and will get $2.3 billion for the spectrum, Time Warner owns 31.2 percent and will get $1.1 billion, and Bright House will get $189 million for its 5.3 percent.
While spectrum might seem like a rather boring topic to the average consumer, its availability could eventually have an impact on how well your mobile devices work. At this point, the wireless carriers have enough spectrum to keep their networks running, but they argue that with more and more people picking up smartphones and other data-hungry devices like tablets, that bandwidth is running low.
"Spectrum is the raw material on which wireless networks are built, and buying the AWS spectrum now solidifies our network leadership into the future, and will enable us to bring even better 4G LTE products and services to our customers," Dan Mead, president and CEO of Verizon Wireless, said in a statement.
Earlier this month, wireless trade group CTIA, of which Verizon Wireless is a member, said that for the first time, the number of wireless subscriber connections surpassed the U.S. population—327.6 million versus 315.5 million—meaning there are more smartphones, tablets, and other wireless gadgets than there are people in the United States.
Verizon Wireless has been actively building out its 4G LTE network since last year; as of Nov. 17, it was available in 179 markets, and the company plans a further expansion on Dec. 15. The network's performance earned high marks on PCMag's fastest mobile networks test for 2011.
Under today's deal, meanwhile, the companies involved have signed agreements to sell each others' products and services. Comcast could bundle Verizon Wireless service with one of its packages—get Xfinity triple play plus Verizon Wireless mobile service for one price, for example.
Similarly, Verizon Wireless could offer its customers access to Comcast, Time Warner, or Bright House cable and digital phone service. When asked how that might affect Verizon's FiOS service, a Verizon spokesman said FiOS is only available in 12 states at this point, whereas Verizon Wireless is nationwide. "Where there's overlap, Verizon Wireless can bundle with FIOS," he said.
While the major players agree that wireless carriers could benefit from having additional spectrum, how to dole out the limited amount of available spectrum has been a point of contention. In addition to private companies, public safety officials are also jockeying for a piece of the spectrum pie for the development of an interoperable emergency network. The Federal Communications Commission has backed the idea of voluntary auctions—broadcast stations would sell off unused spectrum to wireless companies—but broadcasters have expressed concern about whether the auctions would be truly voluntary.
That debate has been going on for more than 10 years, spurred by the Sept. 11, 2001 terrorist attacks. Most recently, the House Energy and Commerce Committee's Communications and Technology subcommittee approved a bill that would allocate 10 MHz of spectrum within the 700 MHz band, or D block, to public safety while providing up to $6.5 billion for construction of a 20 MHz nationwide, interoperable public safety broadband network for first responders.
In the near term, Verizon's deal shines a light on AT&T, which is struggling to acquire T-Mobile. AT&T just took a $4 billion hit to pull its acquisition application from the FCC after the commission found that the deal was not in the public interest, and it is battling the Department of Justice in court on similar grounds.
AT&T has argued that spectrum is a major factor in its purchase of T-Mobile, and slammed the FCC yesterday for not paying closer attention to the spectrum issue in its staff report on the merger.
Jim Cicconi, AT&T's senior vice president of external and legislative affairs, also accused the FCC of being hypocritical. "Surely, it is neither fair nor logical for the FCC to trumpet a national spectrum crisis for much of the past year, and then draft a report claiming that two major wireless companies face no such constraints despite sworn declarations demonstrating the opposite," he wrote in a blog post.
As PCMag's mobile analyst Sascha Segan noted on Twitter, "maybe AT&T should have tried to buy SpectrumCo spectrum instead. Whoops."
Like the AT&T, T-Mobile deal, meanwhile, the FCC will have to approve Verizon's spectrum purchase. "When the applications come before us, the FCC will undertake a thorough, fair, and fact-based review of the proposed transaction," an FCC spokesperson said today.