Editor's Corner—The battle over 5G spectrum has begun

Mike Dano

AT&T, Dish Network, Verizon and Google each separately announced today that they will be acquiring or deploying the kind of high-band spectrum assets that many expect will be critical to providing 5G services. The news serves to underscore the potential for a spectrum land-grab as wireless carriers and others look to position themselves to better provide super-fast 5G internet services.

First, the news:

  • AT&T quietly acquired a company called FiberTower in a move that will give AT&T spectrum in the 24 GHz and 39 GHz bands covering 8.4 billion MHz POPs, according to Wells Fargo and AllNet Insights. AT&T is already moving forward with a wide range of fixed wireless trials in a number of different spectrum bands.
  • Separately, in a transaction with EchoStar that covered Sling TV and other assets, Dish Network acquired wireless spectrum licenses covering four markets in the 28 GHz band and certain real estate properties. (AT&T last year described (PDF) the 28 GHz band as a “seminal” band for 5G development.) “It is unclear how much spectrum EchoStar owns in this band but the transaction today seems like another round of spectrum acquisitions by Dish, now with a focus on 5G,” wrote the analysts at Barclays this morning in reaction to Dish’s transaction with EchoStar.
  • Then, Verizon disclosed this morning that it closed its acquisition of XO Communications, which was initially announced last year. Under terms of the deal, Verizon will be able to lease XO's 102 LMDS licenses in the 28 GHz and 39 GHz bands (licenses that Wells Fargo noted cover 188 billion MHz­-POPs, or 23x what FiberTower owned). And Verizon’s interest in that spectrum is clear: The carrier last year said those were the very bands it would use to conduct 5G testing.
  • Finally, Google today added six fixed wireless markets to its Google Fiber coverage map. Google acquired fixed wireless provider Webpass last year; Webpass was founded in 2003 and offers service to “tens of thousands” of customers across a handful of U.S. markets in part by offering fixed wireless service on licensed and unlicensed frequencies stretching across the 6, 11, 18, 23, 24, 60, 70 and 80 GHz bands.

These news items helped point to the growing importance of high-band spectrum (meaning, spectrum above 6 GHz, including the “millimeter-wave” spectrum bands above 26 GHz). Such spectrum generally hasn’t been used much to provide wireless services directly to mobile phone customers; instead, cellular operators have historically used high-band spectrum mostly to backhaul traffic from their cell towers to the nation’s core internet network.

Why is there so much interest now in high-band spectrum?

The reason high-band spectrum has largely been left out of the cellular game is because it has been historically difficult to create reliable, secure, mobile connections in those bands—for example, a rainy day could ruin high-band transmissions. Cellular carriers today mostly use low-band spectrum (like 700 MHz and 800 MHz) and mid-band spectrum (like 1900 MHz and 2100 MHz) to provide cellular services over 2G, 3G and LTE connections.

But the rise of 5G technologies has opened up the possibility for wireless carriers—and others—to offer both fixed and mobile services over high-band spectrum, like 26 GHz and above. While transmissions in these higher bands won’t travel anywhere near as far as transmissions in lower bands like 700 MHz, they do promise to allow carriers to provide much higher speeds and far greater capacity, albeit in smaller coverage areas.

The result would be pockets of super-fast internet service, likely in the kinds of dense, urban areas where well-heeled Americans live and work.

And those kinds of services fit well into the U.S. wireless market of today, where virtually all Americans have access to some kind of cellular connection, and who are now looking for ways to access faster services at lower costs.

Who are the major players here?

Following the close of today’s transactions, three of the nation’s four top wireless operators will have high-band spectrum holdings: T-Mobile acquired roughly 200 MHz of high-band spectrum in the 28-39 GHz range through its purchase of MetroPCS in 2012. And Dish’s move to nab EchoStar’s high-band spectrum holdings indicate the company plans to continue collecting various spectrum licenses that many believe the company will use to leverage a sale or merger with a wireless company like Verizon or T-Mobile (likely following the close of the FCC’s ongoing 600 MHz incentive auction of TV broadcasters’ unwanted spectrum).

As my colleague Monica Alleven noted last year, Straight Path now stands as one of the few remaining independent owners of high-band spectrum. Following its $100 million settlement with the FCC last month for failing to deploy its spectrum holdings, Straight Path now holds an average of 620 MHz in the top 30 U.S. markets and covers the entire nation with 39 GHz spectrum, and it has retained all of its 28 GHz spectrum licenses. (However, it’s worth noting that some investment firms continue to question the value of Straight Path’s spectrum holdings.)

But more high-band spectrum appears to be on the way: The FCC last year promised to open up 11 GHz of high-frequency spectrum for mobile and fixed wireless broadband—3.85 GHz of licensed spectrum and 7 GHz of unlicensed spectrum. The rules create a new Upper Microwave Flexible Use service in the 28 GHz (27.5-28.35 GHz), 37 GHz (37-38.6 GHz) and 39 GHz (38.6-40 GHz) bands, and a new unlicensed band at 64-71 GHz.

Meanwhile, the FCC will continue to seek comment on bands above 95 GHz. According to reports from the FCC’s first meeting yesterday under its new chairman, Ajit Pai, the agency hasn’t yet decided on when and how it will move forward with its “spectrum frontiers” proceeding to release that high-band spectrum.

So what’s next?

Based on speculation from a range of industry observers, here’s what’s probably going to happen:

First, the FCC’s 600 MHz spectrum auction will end in March. Verizon and T-Mobile will probably walk away as the big winners, so they can each expand and bolster their LTE networks. Separately, AT&T will win a contract with FirstNet to help the government entity deploy a nationwide wireless network in the 700 MHz band for police and other first responders—thus giving AT&T more low-band spectrum as well.

Then, Verizon will probably move to acquire a cable company like Charter Communications in an effort to expand its fiber holdings so that it can control more of the nation’s core fiber infrastructure (that was part of the company’s reasoning for purchasing XO).

Verizon may also make a play for Dish’s trove of spectrum, which includes roughly 75 MHz of spectrum nationwide across AWS-3, PCS H Block and AWS-4 spectrum blocks. Some analysts have argued that Verizon is running out of network capacity and will soon need more mid-band spectrum.

Then, most likely, SoftBank will try again to merge Sprint with T-Mobile, a combination that wouldn’t likely need much high-band spectrum for 5G thanks to Sprint’s significant 2.5 GHz spectrum holdings.

And most likely, all of these transactions would sail through a Trump administration and an FCC that has vowed to reduce government regulations.

At least, that’s my take. –Mike | @mikeddano