The government gave AT&T a consolation prize yesterday when it approved the big carrier's acquisition of Qualcomm's unused wireless spectrum after turning down its ingestion of T-Mobile.
Qualcomm's 6 MHz of nationwide spectrum, plus another 6 MHz in New York, Boston, Philadelphia, Los Angeles, and San Francisco, will be used to speed up AT&T's 4G LTE service. (The spectrum is left over from Qualcomm's failed FLO TV mobile TV service.)
Perhaps aiming to show it doesn't outright hate AT&T, the government agreed to let AT&T set up a custom frequency layout, which will make it more difficult (but not impossible) to roam on, much to the dismay of rural carriers. Kevin Fitchard at GigaOm has a really good explanation of that one.
The FCC will discuss the complicated issue of 700 MHz roaming next year. That will be the time to fight that one out. LTE roaming in general is a mess, with 38 different bands being used worldwide, according to the GSM Association. That will make it different to move phones from carrier to carrier and from country to country, raising prices for everyone.
This purchase, and Verizon's recent purchase of cable company spectrum, are very different than AT&T's doomed buy of T-Mobile. Rather than squashing a competitor, these guys are snapping up spectrum that nobody's using. If you're really uncharitable, you could say they're squashing potential competitors, but it really didn't look like these companies were going to use it.
There is one big problem with that Verizon spectrum purchase, but it has nothing to do with the purchase itself. Verizon appears to be agreeing to effectively stop competing in home broadband, no longer expanding its FiOS fiber system to new markets. Could anything possibly be more anticompetitive?
Back in wireless, there's a glorious regulatory alternative universe where the FCC would require band compatibility for roaming and might even demand that the fallow spectrum go to new or smaller entrants, but we really don't live there. Let's just be glad T-Mobile didn't get stamped out.
So What About T-Mobile, Anyway?
All of these spectrum grabs leave T-Mobile in a tough position, of course, as spectrum the company could otherwise use gets sucked up by larger players. (Sprint has plenty of spectrum as long as it maintains control of Clearwire.)
The company isn't without options, though. It's getting some spectrum as part of the AT&T "break-up fee," along with a preferential roaming agreement. It could partner or merge with Dish Networks (which owns its own spectrum) or smaller carriers like U.S. Cellular. If the FCC demands some divestitures for Verizon to buy the cable companies' spectrum, those airwaves could be directed towards T-Mobile or smaller players.
I've heard that T-Mobile is working on HSPA+ 84, a technology that's as fast as many LTE systems but works in its limited spectrum. That could keep it going for a while.
Remember also that a year is a long time in wireless. Within a few years we could have more spectrum auctions, or a radical expansion of the new "white spaces" wireless technology, which could upend current business models. T-Mobile also might have a new owner by then. That story is far from over; T-Mobile is far from doomed.
The Spectrum Balancing Act
Everyone in the mobile industry agrees that data-hungry 4G phones are going to need more and more spectrum. So it's good to see that unused spectrum isn't just being sat on—that it's being handed over from companies like Qualcomm, who aren't using it, to wireless carriers who'll use it to build 4G networks.
The trick is balancing the most efficient use of spectrum with keeping the nation's wireless market competitive. The most efficient use, of course, would be for there to be one giant carrier controlling all wireless spectrum, but that would lead to high prices and no incentive to innovate.
Could more regulation of scarce spectrum lead to more competition? Yeah, probably. At least there should be more requirements around roaming and interoperability. But for now, things aren't looking too bad. Verizon and AT&T will make good use of the unused spectrum they just purchased. T-Mobile and Sprint have options. With the T-Mobile/AT&T merger dead, we're likely to keep having four national carriers. Let's have a happy holiday and enjoy our new smartphones.