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Summary:

By buying NextWave, AT&T removes the biggest obstacle to its plan to convert the Wireless Communications Services band from a worthless patch of airwaves to highly valuable 4G spectrum. The deal will cost AT&T $600 million but would pay dividends in new LTE capacity.

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AT&T may have just solved the problems that have plagued its Wireless Communications Services (WCS) spectrum, rendering the airwaves worthless since they were first auctioned in 1997. It plans to acquire NextWave Wireless, the next largest holder of WCS licenses, which would remove the primary obstacle to turning those 2.3 GHz airwaves into a viable 4G band.

AT&T will pay $25 million for the spectrum plus a possible contingent payment of up to $25 million, which is paltry. But in a separate deal with shareholders it has agreed to take over NextWave’s $600 $550 million in debt. In exchange AT&T will get WCS licenses covering 210 million people.

To understand the implications of the deal, you first have understand why WCS is such a problematic band. Bisecting WCS are Sirius XM Radio’s satellite broadcast signals, which would be knocked out if a high-powered terrestrial cellular was transmitting nearby. After years of impasse, AT&T and Sirius finally settled their differences, and in June submitted a joint proposal to the FCC that would allow both an LTE network and Sirius’s satellite radio service to coexist peacefully.

But that proposal didn’t solve the whole problem. The plan called for creating “guard bands” on either side of Sirius’s spectrum – no man’s lands where mobile carriers weren’t allowed to transmit. Those guard bands would sit in two portions of the WCS called the C and D blocks, effectively eliminating any possibility of using those licenses commercially. Guess what? AT&T doesn’t own much C-and D-block, but NextWave owns a heck of a lot it.

By buying NextWave, AT&T eliminates the biggest possible source of opposition to its joint proposal with Sirius. It’s a fascinating – and kind of brilliant – maneuver: AT&T is buying spectrum it can’t possible use for 4G, but in doing so AT&T could then turn its own worthless WCS spectrum into highly valuable 4G airwaves.

Of course, AT&T needs to get FCC and U.S. Department of Justice approval for the deal. And it needs the FCC to grant its request to retool the WCS band. AT&T hasn’t gotten much love from regulators since the T-Mobile debacle, but I doubt there will be much opposition to this deal. The WCS airwaves have sat idle for a decade and a half – a shameful waste of a public asset. AT&T’s proposal would finally put those airwaves to use.

AT&T will also gain NextWave’s Advanced Wireless Services (AWS) licenses covering about 60 million people — mostly in smaller markets – which should help AT&T bulk up the next phase of its LTE rollout. NextWave also owns or leases a few 2.5 GHz licenses, which is the same spectrum Clearwire uses for WiMAX. AT&T presumably gains those licenses as well, though it probably has little use for them and didn’t even mention them its announcement.

Trespassing photo courtesy of Shutterstock user Nicolas Raymond

  1. I’m confused:
    “Guess what? AT&T doesn’t own much C-and D-block, but NextWave owns a heck of a lot it.”

    I understand the need/desire for the guard bands …. but why would AT&T need C&D then ??? They bought C&D to sit on it so they could use A&B blocks??

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    1. If AT&t was to purpose use of the band, the only way to stop the interference was large guard bands because of the low power of satellite transmissions. If they proposed to use the band with the large guard band restrictions, it essentially makes the spectrum license owned by other companies completely useless. This would make those companies very upset and they would most likely oppose the ruling that would allow At&t to use their spectrum and render theirs useless.
      This way At&t will get SOME usable WCS spectrum, but more importantly they will control the other spectrum which will allow no opposition to their guard band plans and almost guarantee the ability to use the remaining spectrum. I believe they are also getting some AWS spectrum in the deal, but I have no idea how much or where the licenses are…

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  2. Lindsworth Horatio Deer Friday, August 3, 2012

    Minister of Science Technology Energy and Mining Phillip Paulwell allocates 700Mhz and Fiber Optic License for LTE – Broadcasters effectively on notice for Digital Switch Over in Jamaica!!!

    Questions abound as to who will be coming to Jamaica to do LTE. Even bigger question: Who’s the contractor for TVJ and CVM TV to achieve DSO?

    http://bit.ly/M8UJwI

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