Phoney Spectrum Scarcity

Posted by Sam Churchill on

“That’s where the money is”
Willie Sutton

Verizon Wireless, the largest U.S. mobile-phone carrier, may follow AT&T in introducing tiered pricing and eliminating unlimited data plans, reports Business Week (see Dailywireless: AT&T Data Caps Extend to Femtocells & AT&T’s New Data Plans).

“We will probably need to change the design of our pricing where it will not be totally unlimited, flat rate,” John Killian, chief financial officer of Verizon Communications Inc., the wireless unit’s parent, said in an interview at Bloomberg’s headquarters in New York today.

Verizon currently requires 3G smartphone users to pay $30 per month for unlimited data, with 3G multimedia device owners required to pay $9.99 per month for 25 MB of data.

AT&T revamped its data pricing plans this month, eliminating their $30/month unlimited (5GB) option for the iPad. New AT&T customers must purchase either a 200 MB of data plan for $15/mo or 2 GB plan for $25/month. The $25/mo (2GB) plan replaces the existing $29.99 unlimited plan. On the $25/mo (2GB) plan, you pay $10 for each additional GB.

Now 5 GB/month will cost $25 + $30 = $55. Some subscribers say AT&T’s new data plan will nearly double their monthly bill.

The company anticipates “explosions in data traffic” over wireless networks as new phones on 4G networks incorporate data- heavy applications, such as video downloads, he said.

This chart shows the unused AWS spectrum owned by AT&T and Verizon in light blue.

T-Mobile has activated their AWS spectrum for HSPA+ service, nationwide. AT&T and Verizon, in contrast, paid more than $4 billion for their AWS spectrum. Spectrum that remains untouched.

Bidders Net total of high bids
1. T-Mobile $4.2 billion
2. Verizon Wireless $2.8 billion
3. SpectrumCo $2.4 billion
4. MetroPCS $1.4 billion
5. Cingular $1.3 billion
6. Cricket $710 million
7. Denali Spectrum $365 million
8. Barat Wireless $127 million
9. AWS Wireless $116 million
10. Atlantic Wireless $81 million
Click here to find out who is backing these bidders.

700 MHz Spectrum Winners (2008)
Source: Telephony
Bidder Total bids Spectrum acquired
#1 Verizon Wireless $9.36B C Block open access covering lower 48/key metro and economic areas
#2 AT&T $6.64B B Block metro licenses in large cities across the U.S.
#3 EchoStar/DISH Network $711M 168 E block (unpaired) licenses across the U.S.
#4 Qualcomm $588M E Block licenses in Boston, Los Angeles and New York City; placed sole bid on D Block public safety license (but didn’t win)
#5 MetroPCS $313M Single A Block license in Boston
#6 Cox Communications $304M 14 A block, 8 B block
#7 US Cellular $300M 25 A block, 127 B block
#8 Cellular South $191M 14 A block, 10 B block
#9 CenturyTel $150M A and B Block licenses in its LEC territory
#10 Vulcan Spectrum $112.8 $43.6 million for A Block” in Portland, Salem and $69 million for Seattle, Tacoma, Bremerton

Here are the facts from the FCC:

  • Verizon Wireless spent $2.8 billion for (currently unused) AWS frequencies and $9.36B for 700 Mhz — but at least they plan on using their 700MHz frequencies. Verizon completed technical trials of LTE in Boston and Seattle and is now moving on to “friendly user trials” in five cities.
  • AT&T (then Cingular) spent $1.3 billion for AWS frequencies in the 2006 auction and $6.64B for 700 MHz frequencies in 2008. AT&T also paid $2.5 billion in cash for 700 MHz licenses owned by Aloha Partners. AT&T now covers 100 percent of the top 200 markets. AT&T has spent over $10 billion for 700 MHz and AWS spectrum. They won’t use any of it anytime soon.
  • Cable operators spent $2.4 billion for (currently unused) AWS frequencies. Comcast and Time Warner then invested billions in Clear’s Mobile WiMAX frequencies at 2.6 GHz, which they are now using instead of their AWS spectrum. Cable operators are sitting on $2.4B in AWS spectrum – just speculating the price will appreciate. Consumers be damned.

Telcos paid over $15 billion for spectrum they are not using. AT&T is the worst offender, sitting on more than $10 billion in spectrum. The FCC seems to encourage this kind of speculation, and is doing the Telco’s bidding by opening more spectrum for corporations to sit on.

Why? That’s where the money is. The U.S. government finds it hard to turn down $20 billion in cash. But it’s flawed policy. It doesn’t serve the public.

Telecommunication companies should use it or loose it.

In October 2009, a Department of Commerce survey found that a little over one-third of households did not use a broadband service, sometimes by choice, but often because of cost. At least two of the five FCC commissioners, Michael Copps and Mignon Clyburn, have said that broadband needs to be seen as a civil right.

The FCC’s 2006 AWS auction sold 1,122 licenses, grossing $13.9 billion for the U.S. Treasury. T-Mobile USA, the No. 4 U.S. wireless provider, topped the bidding by offering almost $4.2 billion for 120 licenses, Verizon was 2nd, spending $2.8B and cable operators (SpectrumCo) was third, spending $2.4 billion.

T-Mobile, Cricket and MetroPCS are using their expensive AWS spectrum. Verizon and AT&T are not.

SpectrumCo, the AWS bidding consortium with Cox, Comcast and Time Warner Cable, picked up 137 licenses in 2006’s Advanced Wireless Services auction (at 1.7/2.1 GHz). SpectrumCo won a total of 137 AWS licenses for $2.37 billion. Comcast’s share was $1.29 billion, followed by Time Warner Cable’s $632.2 million, and Cox’s $248.3 million. (See SpectrumCo Gets Licenses). Cox paid $248.3 million for AWS licenses in 2006, and transfered those licenses out of SpectrumCo and directly to Cox.

Verizon’s CEO Ivan Seidenberg now says there’s plenty of spectrum after all. He thinks the FCC should butt out and let big business manage spectrum.

Money talks. It can make a persuasive case for some legislators and regulators.

Mike Dano in Fierce Wireless created a chart (below) that breaks down the projected “4G” coverage of AT&T, Verizon, Sprint and T-Mobile in the US by the end of the year.

Telcos aren’t in business to provide service. They’re in business to make money. Speed and coverage are coming. Affordable rates are not. Phoney scarcity is why.

Related Dailywireless articles include; AT&T Data Caps Extend to Femtocells, AT&T’s New Data Plans, T-Mobile: Now HSPA+ Coverage for 75M, Public Safety: Show Us The Money, Clear: No Limits, FCC to Okay $2.3B AT&T Deal, Cellcos: One Thing – Bandwidth, T-Mobile Eyeing Clear Spectrum, FCC Considers Auctioning Off TV Frequencies, FCC Okays Terrestrial LTE for SkyTerra, Battle of the Bands Goes to Congress, D-Block: It’s Done; Congress Pays, LTE: Cox Cable Calling , White Spaces Trialed in North Carolina, FCC: Change for Broadcasting & USF, FCC Moves Forward with White Space Databases, Comcast Goes Mobile with WiMAX, Time-Warner Adding Mobile WiMAX Service,Free Internet Access Proposed by FCC, National Broadband Plan Previewed, D-Block: It’s Done; Congress Pays, FCC “Finds” 500MHz?, FCC Floats “100 Squared” Initiative, FCC to Auction TV Airwaves?,

Posted by Sam Churchill on Friday, June 18th, 2010 at 9:52 am .

Leave a Reply