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Verizon Wireless and Leap Wireless, parent of Cricket, have applied for a significant exchange of spectrum between the two companies, reports Mobile Burn. Leap will give Verizon a spectrum license that covers about 18.7 million residents, and Verizon will give Leap some Chicago area licenses that cover about 11 million residents (FCC pdf).

In the exchange, Leap would get a 12 MHz 700 MHz A Block license covering Chicago that Verizon paid $152 million for during the FCC’s 700 MHz auction in 2008.

Leap currently owns 10 MHz of spectrum in Chicago, and will use the additional spectrum to launch LTE service in the Windy City. Verizon currently offers LTE service in Chicago using its 700 MHz C Block spectrum.

Verizon, meanwhile, will acquire from Leap 23 PCS licenses and 13 AWS-1 licenses covering locations across the country, as well as a handful of other licenses. Verizon said it will use the spectrum to bolster its CDMA EV-DO and LTE networks.

Cricket spent $710 million in the AWS auction, back in 2006. Their largest purchase was the E block for the Central region, which they managed to snag for $122 million.

The rest of their purchases were mostly in the A and C blocks. Major cities covered include Milwaukee, Memphis, San Diego, Philadelphia, Washington, St. Louis, Baltimore, Minneapolis, and Seattle.

Leap already owns about 10MHz of the 700MHz spectrum block in the Chicago area, and the 12MHz that it would gain from Verizon would be enough to allow it to deploy LTE services on the 700MHz bands. Verizon’s own LTE coverage in Chicago uses a different area of the 700MHz block, so it would not be affected by the exchange with Leap.

Verizon currently does not use the AWS frequencies in bought in 2006. It plans to supplement its 700MHz LTE coverage with their AWS spectrum, much in the same way that AT&T plans to use their AWS spectrum it may (or may not) acquire through its planned purchase of T-Mobile.

Verizon almost certainly is in talks with cable’s SpectrumCo, which owns AWS frequencies across the country. Taking that spectrum away from AT&T would be a big win, both strategically and operationally.

Unfortunately, neither AT&T nor Verizon have (yet) installed any AWS basestations or offer any AWS service. Both the telcos also compete with cable operators by delivering video to the home over twisted pair or fiber optics.

MetroPCS is currently using LTE in narrow channels on their AWS band.

Neither Metro PCS nor Leap Wireless have nearly as much AWS spectrum as AT&T and Verizon. But neither AT&T nor Verizon has seen fit to use their AWS spectrum (yet).

Instead, the two dominant carriers in the United States apparently prefer to let artificial scarcity drive prices up.

Dish Networks and its financial backers could be the key player here. Tech companies may have enough juice to create a strong 4th network in the 2 GHz band.

Related Dailywireless article include, AT&T: Selling Assets for Merger Approval?, AT&T Looking To Sell Spectrum?, Merger Salvage Plan by AT&T, DOJ Blocking AT&T/T-Mobile Merger, AT&T Merger: More Heat, Dish Network’s 700 MHz Spectrum, Spectrum Drama: Made for TV,

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