Verizon plan benefits new entrants, pushes AWS band ‘from marginal to mainstream’

Verizon Communications Inc.'s plan to sell off some of its 700 MHz spectrum in the United States to gain more AWS holdings could deliver significant benefits to new entrant carriers in Canada, Iain Grant, managing director with the Seaboard Group, said in an interview. Last week, Verizon said it intends to auction off its 700 MHz spectrum holdings in the A and B blocks in the U.S. in exchange for regulatory approval of the purchase of holdings in the AWS band (1700 MHz and 2100 MHz) from a consortium of American cablecos. The spectrum transactions remain far from sealed, but Grant told The Wire Report that Canadian carriers are now assessing the potential impact of the AWS deal on the Canadian market. “Since the announcement came out last week, most of the lights that have been burning in Canada wireless companies have been on the economic models,” he said. Grant said that, if the deal is approved, Verizon will move quickly to roll out fourth-generation LTE services on the cablecos’ AWS spectrum to supplement its operational LTE network on the C block in the 700 MHz band. That will encourage smartphone manufacturers to build more LTE-equipped devices compatible with the AWS band to appeal to the customers of Verizon, North America’s largest wireless carrier with 108.7 million subscribers. Canadian new entrant carriers operating only on AWS spectrum include Wind Mobile, Mobilicity and Quebecor Media Inc. subsidiary Videotron Ltd. Those providers do not offer the Apple Inc. iPhone in Canada because it is not compatible with the AWS band. Those carriers would benefit from Verizon's spectrum plan, Grant said. “If Verizon does in fact move to AWS, this is hugely good news for Wind and Mobilicity and for Videotron,” he said. “It propels the AWS ecosystem from marginal to mainstream and means that those companies will not have the same pressure to get 700 MHz spectrum so they can get LTE,” he said. Tony Lacavera, Wind’s chairman and CEO, said it would be a “positive development” for the Canadian market if Verizon sold its A and B block licences for access to more AWS. “This is certainly good news for AWS and the long-term value of AWS,” he said in an interview. “But this does not in any way reduce the importance of 700 for us to become a fourth national carrier,” he said. Lacavera said 700 MHz spectrum licences, to be auctioned by Industry Canada in the first half of 2013, remain important because of the frequencies’ propagation qualities, allowing for travel across greater distances with fewer towers and better penetration of buildings and underground parking lots. He said many LTE-equipped smartphones on the market today are built to operate on the 700 MHz band. If Verizon rolls out an LTE network on AWS in the U.S. and handset manufacturers follow demand for LTE devices on the band, Wind, Mobilicity and Videotron would need to invest in building LTE networks on their own AWS frequencies in Canada, one industry insider, who asked to remain anonymous, told The Wire Report. The new entrants would face challenges overlaying new LTE networks on AWS spectrum that they now use to operate existing HSPA networks, the insider said. “No one’s saying there’s not going to be challenges,” Grant said when asked about the insider’s comments. “The new entrants are likely going to need additional spectrum somewhere, and 700 MHz is the current somewhere,” he said. Bruce Kirby, vice-president of strategy and business development at new entrant Public Mobile, which offers services on the PCS band (1850-1990 MHz), said other new entrants should be more concerned about what will happen to their existing networks and corresponding handset ecosystems. “Their problem is not LTE on AWS, it’s getting HSPA sustained on AWS,” he said in an interview. Kirby said Canadian carriers operating on AWS rely on devices manufactured for subscribers of T-Mobile USA Inc., the fourth-largest carrier in the U.S. market. He said it is only a matter of time until T-Mobile upgrades its services on AWS to LTE and moves its HSPA services onto its PCS spectrum holdings. This would encourage Canadian new entrants to upgrade their networks to LTE because most do not own PCS spectrum licences, Kirby said. T-Mobile opposes Verizon’s spectrum transactions and has urged the U.S. Federal Communications Commission (FCC) to kill the deals. “T-Mobile Representatives discussed the fact that, unlike T-Mobile and other wireless carriers, Verizon Wireless has not used its existing AWS spectrum in any way in the six years it has held the licenses, and that the instant transactions would add even more AWS spectrum to Verizon Wireless’ unused spectrum inventory,” Jean L. Kiddoo, legal counsel for T-Mobile, wrote in a regulatory filing to the FCC dated April 19. “They noted that given this dismal track record on utilization of its current AWS spectrum, it would make no sense, and would be inconsistent with the Commission’s charge to ensure that spectrum transfers serve the public interest, to allow Verizon to acquire additional AWS licenses, especially at this time of an industry-wide spectrum crunch,” he wrote. Grant said he expects any sale of Verizon’s 700 MHz spectrum to impact the Canadian spectrum auction, expected in the first half of 2013. If the proposed sale goes through, there will be an incumbent “gold rush” to the B block holdings in the 700 MHZ band that serve AT&T Inc.’s 103.2 million subscribers, he added. Kirby said it is ironic that Verizon is under pressure to sell off prized 700 MHz spectrum to obtain more AWS blocks. “To me, the most remarkable thing is that you have Verizon, with far less spectrum than any Canadian incumbent, being pressured … to spin off some of the spectrum they have,” Kirby said. “It’s vastly different from Canada, where the incumbents have never given up a megahertz of spectrum.” nkyonka@thewirereport.ca

Verizon plan benefits new entrants, pushes AWS band ‘from marginal to mainstream’

News | April 25, 2012

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