Verizon has announced to two spectrum sales, each for a single rural license: Panhandle Telecommunications will get a 10 MHz chunk covering 12 northwest Texas counties while fellow Texas provider Nortex Communications will take possession of a 12 MHz block in four counties north of Dallas. Prior to the FCC deal Verizon said it has had cut deals with seven more operators covering 24 licenses in the pipe, and it said it is evaluating multiple additional bids, though there’s no word whether these deals are for more rural licenses or for Verizon’s metro market airwaves.

Verizon is selling some very attractive 700 MHz frequencies in some of the country’s biggest markets. Verizon has already traded away one of valuable Chicago licenses to Leap Wireless, but it has another spare 12 MHz in the Windy City for sale, as well as significant holdings in big cities from Los Angeles in New York.

The wild card in all of this is AT&T. It’s the only operator of the big four that uses the lower 700 MHz for LTE, and it could find Verizon’s B-block licenses very useful for filling out its nationwide 4G footprint.

Image courtesy of Flickr user turtlemom4bacon.

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Speaking at a T-Mobile media briefing, Illinois Institute of Technology Vice Provost and computer science research professor Dennis Roberson presented a study that accused Verizon of using flawed math when it made its efficiency calculations. He stated that once that math is corrected – surprise, surprise – T-Mobile comes out on top.

You can look at Roberson’s full regulatory filing and presentation on T-Mobile’s Website, but basically his argument is this: Verizon treats all of its connections as equals in its analysis without accounting for the number and usage levels of smartphones consuming most of the bandwidth; and Verizon treats all spectrum as equal though some frequencies are more efficient than others.

What it boils down to, though, is that Verizon is crunching its numbers one way, and T-Mobile is crunching them another way. I’m sure if he so chose, Roberson could finagle that data to correlate Verizon’s spectrum use to an increase in tooth decay.

The pathetic thing about this situation is that T-Mobile isn’t wrong. T-Mobile is the most efficient user of spectrum in the country, while Verizon is probably the most inefficient. T-Mobile’s argument is sitting right in front of it. Verizon is parked on loads of Advanced Wireless Service (AWS) and 700 MHz licenses that it has yet to touch and – in the case of 700 MHz – actually plans to sell. The Federal Communications has even started calling Verizon on its spectrum warehousing practices.

Meanwhile, T-Mobile has put practically every megahertz of spectrum its has every bought to use either in its GSM or HSPA+ networks. In fact, T-Mobile is so strapped for airwaves, it’s cannibalizing its 2G networks to make room for more efficient mobile broadband technologies such as LTE. T-Mobile couldn’t make a better argument than that to show it’s making the most of the limited resources it has.

T-Mobile is angling to get this deal killed so it can get a shot at buying up the cable operators’ penthouse airwaves. I have little doubt if T-Mobile were to prevail it would make immediate and good use of those frequencies, while its competitors might sit on them for several years.

But I also think T-Mobile is being a bit hypocritical here. T-Mobile today may be coming off as the consumer hero in magenta-colored tights, but a year ago things were very different. At the beginning of 2011, Deutsche Telekom had all but written off its U.S. operator, refusing to invest any more in spectrum or infrastructure. It threw in the towel completely when it agreed to sell T-Mobile USA to AT&T – which was perhaps the most anti-competitive action imaginable.

T-Mo has basically done a complete 180 in the space of a year, and now it’s asking the FCC to accommodate its new role as industry savior. It may be the everyman’s carrier today, and that’s great. But who knows what T-Mobile will be tomorrow.

Photo courtesy of Shutterstock user Picsfive

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The licenses in question aren’t the airwaves Verizon is using in its current nationwide LTE rollout. Verizon has a nationwide 20 MHz chunk of 700 MHz, which is forming the backbone of its 4G network. Instead, Verizon plans to sell regional and metro-area licenses it picked up to supplement is capacity in high-demand urban markets. Once it picks up the Comcast, Time Warner Cable, Bright House Networks and Cox Communications’ advanced wireless services licenses (AWS) in the 1700 MHz/2100 MHz band, Verizon will no longer need those extra 700 MHz licenses to provide that additional metro capacity – or so its logic goes.

It’s an almost certainty that the cable spectrum sale will go through, but the Justice Department may have something to say about the joint marketing agreement that Verizon has brokered with the cable operators.

You can bet AT&T will be first in line to pick up whatever Verizon doesn’t want. These aren’t piddly little chunks of spectrum. We’re talking 10 MHz and 20 MHz swathes in New York City, Chicago, Los Angeles and dozens of other major markets. What’s more while those licenses — known as the lower “A”and “B” 700 MHz block — don’t gel with Verizon’s 4G deployment plans, they fit perfectly with AT&T’s own LTE network schemes.

AT&T’s LTE network is being built on those A and B lower 700 MHz blocks all over the country, but in many places it only owns a one or the other of those limited numbers of licenses, which severely limits its ability to scale 4G capacity in key cities. For instance in Chicago, AT&T has only deployed an LTE network with 10 MHz of capacity compared to the 20 MHz systems it has launched in most other markets. If AT&T were to scoop up all of those licenses it would have 30 MHz or more to devote to LTE in country’s largest cities, and it could build on the capacity further after it folds the 700 MHz it just acquired from Qualcomm into its network.

AT&T certainly wouldn’t be the only bidder. Regional carriers are building LTE networks as well. You can expect U.S. Cellular to compete with AT&T for Verizon’s Chicago license, which would allow it to extend its new LTE network to its flagship market. Leap Wireless, MetroPCS and numerous smaller operators may look to pick up licenses within their territories as well.

The sale may make sense from an operational standpoint. The 700 MHz band isn’t a unified block, and to support those A and B frequency bands means Verizon has to procure more expensive devices, which would be interoperable with other carriers’ LTE networks. By discarding the extra spectrum, Verizon essentially creates its own unique LTE band, which utilizes its own unique devices.

But Verizon is sure to face enormous criticism for the sale. Big Red has maintained that the U.S. wireless industry is in the midst of a spectrum crisis and that it will begin running out of LTE capacity in many markets as soon as 2013. If the spectrum situation is so dire, than why is Verizon giving up such valuable airwaves?

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The move is the first Verizon Wireless has made with Time Warner to sell each other’s respective wireless and wire line wares, but Verizon and Comcast have already forged ahead on the west coast, working together in Portland, Ore.; Seattle and Spokane, Wash.; and San Francisco. In the Bay Area, Verizon and Comcast struck right in the heart of AT&T’s U-Verse territory, demonstrating just how powerful their tag team arrangement can be.

Time Warner and Verizon Wireless are kicking off their partnership in Cincinnati, Columbus and Toledo, Ohio; Kansas City, Kan.; and Raleigh, N.C., but plan to expand to other Time Warner markets in coming months. As in the Comcast arrangement, customers will be able to purchase a bundle of Time Warner cable TV, broadband and home phone and Verizon mobile services. They’re also sweetening the deal with a $200 prepaid debit card.

The Federal Communications Commission hasn’t yet approved the $3.6 billion spectrum sale the Verizon-cable partnerships hinge on, and the Justice Department is reportedly examining the implications of the pact on mobile and broadband completion. Congress has also gotten involved, calling Comcast and Verizon executives to task on what amounts to a cease-fire in the residential broadband market.

Verizon and the cable operators argue that their cross-selling venture and the spectrum sale are entirely unrelated, which explains why they’re moving forward with their marketing pact while the fate of their financial transaction is still in limbo. Though the FCC has authority on the license transfer, the Justice Department most likely will have to make the call on whether the partnerships amounts to collusion – and that will require an antitrust lawsuit. That leaves Verizon and the cable operators to press ahead until someone tells them they can’t.

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