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Summary:

AT&T-Mo may be stalled, but Ma Bell is aiming for a consolation prize: Qualcomm’s 700 MHz spectrum. Regulators, however, may impose restrictions on the deal making it easier for small operators to get new smartphones and strike roaming agreements. AT&T is threatening to scrap the deal.

ATT-4G-LTE-Logo

AT&T’s merger with T-Mobile may be on hiatus, but Ma Bell hopes to secure a consolation prize. The Federal Communications Commission is set to approve its purchase of Qualcomm’s 700 MHz Flo TV spectrum, allowing AT&T to build a more powerful LTE network. But the commission may impose restrictions on the band to make it easier for small operators to roam on AT&T’s network and get a hold of the choicest new 4G smartphones. AT&T isn’t happy about those restrictions and is threatening to scrap the deal if they’re imposed. For an operator that claims to be facing a spectrum crunch, AT&T is awfully finicky about the spectrum it’s buying.

Here’s the breakdown: AT&T wants to use new LTE-Advanced techniques to incorporate Qualcomm’s spectrum into a new super-downlink carrier. The end result of that upgrade would be a 4G network that packs an enormous downstream punch while maintaining the usual high-capacity uplink of LTE – perfect for the new streaming and download-intensive apps emerging on smartphones today. But in order to build that network AT&T needs to customize a 700 MHz band plan, which wouldn’t just impact its own spectrum, but every other regional and rural operator with a license in the lower 700 MHz.

Those operators, led by the Rural Cellular Association and regional providers Vulcan Wireless and C Spire, protested AT&T’s plans to the FCC (here’s the RCA filing), claiming AT&T’s “boutique” band plan would effectively isolate them in 700 MHz and force them to change their own LTE-network configurations to accommodate AT&T’s funky super-LTE scheme. They claimed this would have three big consequences:

  • Handset makers would build devices specifically for AT&T band scheme, shutting small operators off from the latest and greatest devices such as the iPhone. While AT&T has the pull to get Apple to make devices for its unique network configuration, C Spire and Vulcan don’t.
  • The configuration would prevent any kind of meaningful roaming agreements over LTE. If AT&T phones don’t work on the regional operators networks and vice versa, carriers become further isolated. LTE is already a global mishmash incompatible frequencies. This would make that fragmentation worse.
  • AT&T is seeking to change what frequencies go up to the tower and what frequencies come down from it, resulting in all operators in the lower 700 MHz giving up a portion of their spectrum to accommodate AT&T’s network plans.

The regional operators not only want to AT&T to stop messing with 700 MHz band plan, they want the FCC to impose mandatory interoperability in the lower 700 MHz as a condition of the Qualcomm deal, so any future iPhone or a Galaxy running on AT&T’s LTE network can work on their networks as well.

The fragmentation of LTE bands (Source: Wireless Intelligence)

AT&T is fighting back. In its own filing with the FCC, AT&T said to implement such an interoperability requirement would cost it enormous investment in its infrastructure, beyond the $1 billion to $2 billion cost of the super-LTE upgrade, as well as hike up the cost of handsets for its consumers. Furthermore AT&T said it would have to upgrade its LTE networks in the 15 markets it has launched in so far and would be forced to delay future LTE expansion. Vulcan Wireless and RCA members conducted a study disputing AT&T claims of cost increases and delays, and AT&T is disputing that study.

The really clincher, however, is at the end of AT&T’s filing:

[An] imposition of an interoperability commitment like that proposed by Vulcan Wireless and other A block licensees would be a materially adverse regulatory condition on this transaction that would result in an AT&T decision to abandon the transaction.

If AT&T doesn’t get its way it will give up on the spectrum – that’s an awfully bold statement for an operator that has claimed consistently since March it needs loads of new frequencies in order to launch 4G and provide affordable mobile data services to its customers. AT&T is willing to invest $39 billion in buying T-Mobile to consolidate its LTE spectrum position. That’s $39 billion before it forks over billions to actually build the LTE network itself.  Interoperability may impose additional deployment costs on AT&T — which no operator wants to incur — but threatening to walk away from the deal may not be the best strategy. An operator claiming to be so desperate for bandwidth can’t afford to be so choosy.

  1. Hello Kevin,

    I thoroughly enjoy your AT&T articles. They convey common sense and facts on the directive of Big Blue.

    Your first paragraph had a quotation that explains AT&T’s persuasive attitude towards this deal.

    They claim that if they need to have restrictive measures on the merge, then they would rather “Scrap” the whole idea. The truth now presides with no refutable argument.

    If a company is going to control such a large percentage of prime spectrum holdings, they should have government mandate imposed regulations. Imagine our current utilities without the regulations that are in place. Now, transpose that detriment to our telecommunications industry. ATT clearly wants to smother out competition by acquiring all the spectrum it can, then forbid any other carrier to use it through roaming agreements.

    Shame on AT&T. Shame on those not viewing the complete scope of the landscape on what AT&T is trying to do. We must all remember that this is the same company that possessed a monopoloy in the 50s and 60s, to finally be broken up in ’84. They are looking to reunite.

    John B.

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    1. This is not at all the same company from the 50s, 60s or even 80s and for that matter 2000. This company is very different – and it is no different than what VZW has done with their LTE restrictions. If C-Spire, et. al would like to roam on the national network, then they should be willing to negotiate at an executive level, rather than running their mouth about the hand that feeds them. C-Spire should be saying the same thing to Sprint – but they have to stay on good speaking terms – for now – do to their joint lawsuit against Big Blue.

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  2. Andrew J Shepherd Thursday, December 15, 2011

    No doubt, while Qualcomm would like to move on expeditiously from its MediaFLO disappointment, AT&T need not be in any great hurry to consummate this transaction for Qualcomm’s Lower 700 MHz D/E block 6 MHz unpaired spectrum. Professed “spectrum crunch” or not, AT&T cannot put the unpaired spectrum into service for at least another year or two until LTE-Advanced spectrum aggregation capabilities become a commercial reality.

    Speaking of spectrum scrutiny, what is surprising is that all wireless carriers thus far have eschewed the Upper 700 MHz D block + Public Safety 34 MHz fully nationwide license. Since Auction 73 nearly four years ago, that prime spectrum has been left just sitting on the table. Is the public/private partnership requirement really that burdensome? With fully 17 MHz x 17 MHz, there is plenty of bandwidth to go around for both subscriber and public safety use.

    For example, deploy three 5 MHz x 5 MHz LTE carriers. Under normal circumstances, use LTE-Advanced carrier aggregation to tie together a single 15 MHz x 15 MHz super carrier. During those rare emergencies that require large scale public safety response, break the LTE-Advanced carrier aggregation links and shunt one, two, or even all three 5 MHz x 5 MHz carriers to public safety, as needed.

    Ideally, a coalition of Sprint, T-Mobile, and regional/rural carriers (e.g. USCC, Cincinnati Bell, C Spire, Cellcom, Iowa Wireless, Viaero, Nex-Tech, Plateau, et al.) should band together and acquire the Upper 700 MHz D + Public Safety license. If VZW and AT&T are going to throw around their massive posteriors to compartmentalize LTE band classes 13 and 17, respectively, as essentially their own their own fiefdoms, unfriendly to all outsiders, then the carriers cowering below the Twin Bells should do likewise and make LTE band class 14 their nationwide “lingua franca.” After all, Sprint + T-Mobile + a bunch of regional/rural carriers would have just about as much collective buying power as AT&T does now.

    As to LTE network build out, Sprint and T-Mobile could divvy up most of the major markets; the smaller carriers in the coalition could take on their respective regional/rural areas. Each carrier could add its own spectrum (e.g. Lower 700 MHz, SMR 800 MHz, Cellular 850 MHz, PCS 1900 MHz, AWS 2100+1700 MHz, BRS/EBS 2500-2600 MHz) to the stew, but LTE band class 14 would remain the common denominator across all markets.

    Even public safety could contribute quasi independently to the build out. Imagine public safety agencies in many traditionally under served rural counties using some investment and engineering expertise from the coalition to tilt up a few LTE 700 sites per county. By 2020, the result could be a third urban and rural truly nationwide network to give the domineering Twin Bells some seriously needed competition.

    AJ

    AJ

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  3. Andrew J Shepherd Thursday, December 15, 2011

    Mea culpa, my comment was so long that I had to sign it twice.

    AJ

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  4. AT&T should continue to expand it’s HSPA+ network along side the Lte build out. I think AT&T wireless customers would be happy if they rolled out HSPA+14 nationwide first like Verizon rolled out 3G on their network years back. There are far too many areas still on EDGE like northern Michigan that is a smartphone’s(like my HTC Inspire)worst nightmare.

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  5. I think AT&T should be treated the same as Verizon. I don’t know the nitty gritty details to answer that question. Verizon sure seems to be putting a lot of deals together and the Feds don’t seem to jump in. I’m certain AT&T has more than enough lawyers to state their case. Time will tell.

    I must say the HSPA+ 14 service on my iPhone is pretty fast. I have played with a 4G LTE Verizon handset and can’t tell much difference as far a looking at web pages. Large files I’m sure are faster, but that is not a big deal with me. If I get 3-5 meg down I’m pretty happy.

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