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Verizon sells 39 spectrum licenses to AT&T for $1.9b, but what does it mean?

Verizon sells 39 spectrum licenses to AT&T for $1.9b, but what does it mean?


Today's blockbuster spectrum deal might tell the tale of shifting strategies for two wireless giants

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Verizon Wireless store (1020)
Verizon Wireless store (1020)

Besides being the most closely-matched competitors in the bizarre, controversial American wireless industry, AT&T and Verizon are known for having the most widely-deployed and matured LTE networks in the business. Those networks have relied almost exclusively on the 700MHz spectrum thus far — a band coveted for its relatively low frequency, which allows better penetration of buildings and other structures and requires fewer cell sites to cover a given area.

Verizon and AT&T are playing different games to stay ahead of demand

But the 700MHz band is only so big. As LTE smartphones saturate the market — which they've started to do in the past year with blockbuster launches like the Galaxy S III and iPhone 5 — operators have no choice but to start to look at other opportunities for rolling out additional capacity. In Verizon's case, it's starting to look at AWS — a band shared by T-Mobile for its 3G and upcoming LTE deployments — as an escape hatch, completing a major deal last year to acquire unused spectrum from cable companies and ensure FCC approval by flipping some of the licenses to T-Mobile.

In AT&T's case, the story is a little more complicated: it already had quite a bit of AWS spectrum in its inventory and currently requires that its smartphones support LTE on the AWS band, but for reasons that aren't entirely clear, it has never rolled it out on a wide scale. Some of that spectrum was lost last year as a "we're sorry for wasting your time" payment to T-Mobile following the collapse of the attempted acquisition. Now, as part of a sweeping $1.9 billion agreement with Verizon, AT&T will be losing additional AWS licenses in "certain western markets" while gaining some 39 700MHz licenses.

What does that mean? It's looking less likely with each passing deal that AT&T intends to use its AWS spectrum, focusing instead on beefing up its 700MHz network before looking at alternatives like WCS. An AT&T spokesperson refused to comment to The Verge on the future of its AWS holdings — but clearly, trading away licenses piecemeal doesn't seem like a strategy for readying a network that you're planning on actually using.

AT&T has no intention of losing overall LTE capacity, and it can't afford to

Obviously, AT&T has no intention of losing overall LTE capacity, and it can't afford to: I've personally experienced significant slowdowns recently on LTE in Chicago, a market where it currently has just half the LTE spectrum of Verizon. With this deal, Chicago is one of the 39 markets where it'll be picking up additional capacity.

The deal is subject to FCC approval. Because it's a relatively even and fair swap between evenly-matched competitors, it's reasonable to expect that it'll be approved.