Sprint to skip spectrum auction in possible blow to wireless competition

28 Sep 2015 | Author: | No comments yet »

Sprint Drops Out of Spectrum Auction.

The airwaves are a crowded place. Sprint plans to sit out a coming auction of wireless airwaves in the US, a decision that will save the carrier billions of dollars but could deprive its network of upgrades in the future.”Sprint’s focus and overarching imperative must be on improving its network and market position in the immediate term so we can remain a powerful force in fostering competition, consumer benefits and innovation in the wireless broadband world,” Sprint CEO Marcelo Claure said in a statement. “Sprint has the spectrum it needs to deploy its network architecture of the future.” The auction will allow broadcasters to sell their unused spectrum to mobile carriers, and get a cut of the purchase price.Phone carriers usually have a voracious appetite for wireless spectrum, and for good reason: they don’t want to lose your business because their networks are overloaded or missing coverage.

Spectrum is what carries wireless signals when cellphone and other mobile device users stream video, post photos online, check websites and use other popular features of the devices. In spite of careful refereeing by national and international regulators, TV broadcasts rub elbows with 4G LTE signals, while GPS transmissions bump into other satellite signals. The spectrum up for bid next year is particularly valuable because it can carry wireless signals long distances between cell towers and easily inside buildings for better customer connections.

Radio spectrum is often referred to as a “scarce resource,” because there are only so many usable frequencies, and everyone has to work together to make sure that signals don’t interfere with one another. Spectrum allocation might seem like a boring topic, but with more and more people picking up bandwidth-intensive gadgets, carriers need spectrum to support them. The provider just announced that it’s passing on the FCC’s upcoming 600MHz auction after determining that its existing airwaves are “sufficient” for its future needs.

Couple that scarcity with the exploding consumer demand for wireless 4G data, and you get the “spectrum crunch”: the point at which there simply isn’t enough wireless spectrum available to carry all the YouTube videos and web pages that people want to watch on their phones. And it’s for that reason that wireless companies such as Verizon and AT&T are willing to pay big bucks for licenses to use additional spectrum bands. Sprint said on Saturday that its airwaves at present are “sufficient to provide its current and future customers great network coverage.” The U.S. wireless carrier is about to commence on another major network overhaul it says will sharply improve data speeds. Last year, there were reports that Sprint and T-Mobile would pool their assets and jointly bid on spectrum (but only if their now-failed merger bid was still in play). Bond analyst Dave Novosel with Gimme Credit has told clients that financing such bids presents a challenge to T-Mobile and Sprint because it probably would force them to take on significant amounts of additional debt.

The most recent auction conducted by the Federal Communications Commission (FCC), which concluded in January, brought in a total of almost $45 billion from wireless companies looking to get their hands on more spectrum. Low-frequency airwaves travel further and penetrate buildings better than airwaves at higher frequencies, meaning carriers can cover larger areas using fewer mobile phone towers. The agency agreed to some restrictions—it set aside 30 megahertz of spectrum per market for smaller companies—but did not give T-Mobile everything it wanted.

Sprint is betting that there won’t be a big spike in demand that requires more spectrum than it has, or that the lack of 600MHz support won’t hobble compatibility or performance down the line. An FCC official said on Sunday that the agency wasn’t surprised Sprint decided not to participate given the public hints it has made in the past few months, and pointed out that the last two major auctions were a success even though Sprint wasn’t involved. Verizon has said it does not need any more huge blocks of spectrum, though recent reports suggest the company is weighing a lease of spectrum held by Dish.

T-Mobile had been fighting to get the FCC to set aside more of the spectrum for bidding by carriers other than AT&T and Verizon, which generally have more resources and financial strength to bid for the spectrum licenses. This “beachfront property” spectrum is especially valuable to wireless carriers because it penetrates buildings more easily and travels over large distances better than higher-frequency spectrum. Remember how Sprint jumped on WiMAX in order to have 4G data before everyone else, only to regret its decision and spend a lot of time playing catch-up with its LTE-toting rivals?

Sprint’s decision to bow out means T-Mobile may have an easier route to winning those airwaves unless other bidders, like technology or cable companies, decide to participate. AT&T, Verizon, T-Mobile, and other companies are expected to bid huge amounts in this auction, especially since it’s the last time for the foreseeable future when a big block of wireless spectrum will be made available for mobile wireless. You’ll get to keep your current user name (as long as it doesn’t contain invalid characters, in which case you’ll have to go through a few extra steps to make the transfer), and all your old comments will eventually (not immediately) migrate with you. The FCC acts as a sort of middleman between the broadcasters and the wireless companies, noting how much money the broadcasters will sell their spectrum for and then encouraging the wireless companies to bid up to and above that amount.

It plans to set up off-balance sheet companies with the backing of parent company SoftBank Group Corp. 9984 -2.27 % to finance phones and network equipment. That is more important for Sprint and its customers than investing in [this] spectrum that won’t benefit our subscribers until 2020 at the earliest.” After the coming auction, it will take several years for the new spectrum to be fully available to the carriers.

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