AT&T Asks FCC to Step Up
Rajesh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The wireless industry has been demanding for additional spectrum and asking FCC to quicken the process of transferring the airwaves. The concern has been voiced by AT&T (NYSE: T) backed by Verizon (NYSE: VZ) at the Telecommunications Industry association event.
Randall Stephenson, AT&T's Chief Executive Officer, expressed his anxiety about the spectrum shortage in the market and the dire consequences of the same in case the FCC fails to speed up the spectrum transferring process. He also believes that the FCC’s proposal of a broadcast incentive auction, from which it expects to raise 50 MHz, will not be enough to satiate the industry’s airwave hunger. The government’s priority should to be to build wireless infrastructure to address the need for economic development.
Stephenson said that the launch of Apple’s (NASDAQ: AAPL) iPhone not only revolutionized the smartphone market but it also paved the way to high data applications. The robust data consumption growth is going to continue in the near future, with network traffic growing at least 75% every year in the next five years.
And what should the carriers do?
Wireless providers, who are in fear of running out of airwaves, want the government to sort out the situation. However, other than this, a number of companies are putting in efforts to develop technology that could better utilized the radio frequencies and improve efficiency.
An advisory committee, comprised of executives from Microsoft and Google, are going to make a presentation this month on examining ways to use computerized radio technology for better spectrum utilization. The technology will also enable in sharing spectrum bands, which will help FCC to further its plan of bringing new spectrum to the carriers. This technology called cognitive radio will help cellphones to scan for available frequencies and then switch to it. For instance, if a particular S-band has been reserved by the government as an Air Force bombing range, and no bombing is being done, the cognitive rays will help the cellphone to identify the open channel and use it.
Other than increasing spectrum utilization efficiency, carriers are trying to consolidate to enhance their spectrum holdings. But Stephenson, from past experience, says that FCC doesn’t consider ‘large scale M&A’ to be a solution.
FCC not fond of mega mergers
Stephenson is clear about the fact that the regulators do not like mega mergers. But the incentive auction and spectrum sharing plans proposed by the FCC does not provide an immediate way out to the carriers who are looking for near term solutions.
The FCC fears a duopoly which decelerates the spectrum license transfer process. Tony Melone, Verizon’s Chief Technology Officer answered to this, saying that he wasn’t very sure about a healthy number of players that should be there in a competitive industry, but knew that the wireless sector could support more than the duopoly. There lies no fear. He further said, supporting Stephenson’s sentiments that let the customer pick who the winners and losers are, not the government.
Nonetheless, history suggests that FCC would advocate smaller deals. So AT&T’s trying to play safe with its eyes on smaller spectrum acquisition
AT&T eyeing Verizon and Dish
After the doomed attempt of acquiring T-Mobile, AT&T managed to receive FCC's sanction for buying 700MHz spectrum from Qualcomm (NASDAQ: QCOM) in a $1.9 billion deal. What’s next? The wireless provider has now set its eyes on Verizon’s spectrum in the 700 MHz frequency which it will be selling once it gets the FCC's approval for its deal with SpectrumCo. Further, AT&T could also be interested in Dish Network’s (NASDAQ: DISH) wireless spectrum, which the latter is trying to get approved for building a network for terrestrial use.
My Takeaway
The US wireless industry is much closer to running out of spectrum than one thinks it to be. FCC should understand that wireless operators need quicker solutions to address the issue. The incentive auction and spectrum sharing are no way going to solve the immediate requirement. While other countries such as Japan, UK, France and Germany have answered the call aptly to make wireless spectrum available to the carriers, FCC is yet to answer.
liveinvestor has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and Qualcomm. Motley Fool newsletter services recommend Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
