Is it Party Time Yet?
Rajesh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Verizon Wireless’ (NYSE: VZ) SpectrumCo deal to acquire spectrum license from the group of cable companies continues to face severe opposition. The carrier recently announced to sell some of its spectrum to foe-turned-friend and one-time critic T-Mobile to alleviate hostility, but nothing seems to work.
The Roadblocks
The above move to swap spectrum with T-Mobile has added to the criticism from MetroPCS (NYSE: TMUS), the Rural Telecommunications Group, and Free Press and Public Knowledge who say that Verizon entered into a spectrum swap deal with T-Mobile to end the latter’s objection on the pending transaction. Further, they say that Verizon’s spectrum deal with T-Mobile does not require the former to part with much spectrum.
The top carrier has been experiencing roadblocks in the deal. It has been criticized of possessing enough airwaves and that it doesn’t even need to seek additional spectrum from the cable deal; the transaction is just one way of increasing its spectrum holding which could be dangerous for the market. Even the FCC and the Justice Department carry such concern along with the worry that they have regarding the co-marketing deal.
However, the Communications Workers of America (CWA) looks more worried fearing that the FCC would approve the deal soon, putting forward some flimsy conditions that Verizon would have to comply with. The CWA has also strongly voiced against the marketing deal which lets Verizon and the cable firms to cross sell each other’s services as well as to research developing new technologies. Other than this, the CWA also fears that the deal approval would lead Verizon to slowdown or even stop the expansion of its FIOS high speed internet which would result in the trimming of jobs.
So when’s the D-Day?
As per sources, the FCC shall complete its review and come out with its decision within the August 21 deadline. There are good chances that the marketing deal too would receive a go ahead signal from the FCC which appears to be pretty impressed with the effort that Verizon has put in to divest some of its spectrum bands.
While this is the case with Verizon, what is chief rival AT&T (NYSE: T) up to?
The closest foe
In an attempt to manage the spectrum tight situation, AT&T is planning to phase out its 2G services by 2017 and divert the freed spectrum to the 4G technology. Other than this, like Verizon, AT&T too is trying to add more airwaves by cracking smaller deals with NextWave Wireless, Comcast (NASDAQ: CMCSA) and Horizon Wi-Com.
However, Verizon currently holds the lead position as its LTE network spans around a population of 230 million people in the US, which estimates to touch the 260 million across 400 markets by this year end. On the other hand, AT&T’s LTE network currently reaches just 80 million people and is expected to increase to 150 million people by year end.
My takeaway
The spectrum crunch environment and the unfeasible incentive auction recommended by the FCC have made carriers to look for other avenues. The auction does not offer immediate relief, while the current level of data consumption need is stressing the available bandwidth. Carriers are throttling the data speed to manage the situation. However, what’s more important is to get access to additional spectrum to satisfy the robust data usage. Though the biggies have for long been accused of warehousing spectrum, their effort to get their hands on more spectrum hasn’t reduced.
They are all out for the spectrum hunt. While AT&T has got cautious after its failed T-Mobile acquisition last year, Verizon has played it well to impress the watchdogs. Though opposition still remains strong, I infer it’s going to be party time for Verizon soon.
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