Spectrum Stash

Spectrum isn't what it used to be, at least in terms of using it as a yardstick to measure how successful major wireless carriers are – or will be. The "sheer volume of megahertz" out there distributed among carriers, particularly after the FCC's AWS auction this past autumn, is truly astounding, says Rebecca Arbogast, analyst at Stifle, Nicolaus. T-Mobile and Verizon Wireless, once seen as short on spectrum in some markets, "evened things" up with AWS purchases and other spectrum acquisitions in the last year, she says.

Marina Amoroso, wireless analyst at Yankee Group, agrees, saying Cingular upped its total megahertz holdings with the AWS auction last summer from 56.8 to 67.6 average spectrum in the top 100 U.S. markets. Sprint went from 49.8 to 53 average spectrum in the top 100 markets.

Even after the AWS auction brought record income to the FCC, bringing in a little over $2 billion, the ranking of carriers according to spectrum holdings didn't change, according to Amoroso's research. Prior to the auction, the top three spectrum holders were Cingular, Sprint and Verizon Wireless – and they remained the top three after the sale. The most significant change, she notes, was the emergence of cable providers. SpectrumCo., a joint venture between cable companies and Sprint, bought licenses that give it average spectrum holdings of 19.3 MHz in the top 100 U.S. markets, with 137 licenses in the auction that cover 90 percent of the U.S. population, says Amoroso. The purchase establishes cable as a significant player in wireless, she says.

Overall, says Amoroso, the spectrum allows carriers to accelerate their move to actual third-generation services. "Mass-market deployment of 3G speeds" is just around the corner in the coming year, she says. T-Mobile, with UMTS technology, is poised to offer 3G services by mid 2007, while Cingular, Verizon Wireless and Sprint will offer HSDPA and EV-DO, respectively, with increasing geographic coverage in the coming year.

However, all of that spectrum won't mean much if carriers can't capitalize on it by rolling out new services and providing adequate service with it. "Consumers don't understand spectrum," says Amoroso. "Consumers say their phone is a 'magic box,'" expecting it to provide the services they're paying for pretty much where they want it, she says. "Spectrum won't help them (carriers) acquire customers," she says. If the network doesn't support users, then those users will go elsewhere.

The FCC's auction of 700 MHz in 2008 is the next big deal for spectrum buyers and could offer up significant changes in the current spectrum-holder hegemony because it offers more efficient building-penetrating characteristics, and would allow carriers to provide more thorough coverage. That spectrum, though, won't get into winning bidders' hands until after TV broadcasters vacate it sometime in 2015 or so.

That means big spectrum holders can't just rest on their spectrum holdings. They've got to know how to use it, not just own it.