Feature Article

January 08, 2013

Verizon Sells More 700-MHz Spectrum: You Might Wonder Why

U.S. Cellular, headquartered in Chicago, IL, has signed an agreement with Verizon Wireless to acquire the company’s Oklahoma City 700 MHz, a block license covering Oklahoma City and 31 other counties within the state of Oklahoma, in total a population of approximately 1.9 million, Verizon Wireless says.

Some might wonder why Verizon would sell spectrum generally considered highly desirable because of its propagation characteristics, such as better ability to get through walls.

In this case, even that consideration, and the fact that Verizon could have used the spectrum to support its Long Term Evolution fourth generation network, is outweighed by other considerations.

Namely, Verizon wanted Federal Communications Commission approval of its purchase of about $3.9 billion in spectrum from SpectrumCo (Comcast, Time Warner Cable, Bright House Networks) and Cox Communications.

So Verizon Wireless is selling about $2.42 billion worth of spectrum that might be more problematic, in terms of interference potential, than the spectrum Verizon Wireless is buying from the cable operators.

But the more important considerations are regulatory. AT&T and Verizon Wireless, as the leaders in the U.S. mobile market, always face scrutiny when buying assets.

At least in part, disposing of the 700-MHz spectrum is one way Verizon Wireless can help assure regulators that it is not amassing “too much” spectrum at the expense of its other competitors.

In fact, some also say the sale of spectrum would have some strategic value to Verizon Wireless, which is giving up “prime real estate” as a way of reassuring regulators it was safe to approve the cable operator spectrum purchase.

That spectrum might have gone to another bidder, eventually, had Verizon not gotten it. The 122 licenses generally offer 20 MHz to 30 MHz of spectrum. The spectrum Verizon Wireless is selling generally consists of 5-MHz blocks that would be paired to create a two-way network of about 10 MHz per license.

Also, most of the spectrum Verizon Wireless is selling is in smaller markets, where the spectrum Verizon has gotten from the cable operators is available nationally.

The Oklahoma City license purchase agreement is a result of Verizon Wireless’ sale process announced in early 2012 for its lower 700 MHz spectrum licenses.

Since 2011, Verizon Wireless has sold or has agreed to sell 37 of its lower 700 MHz spectrum licenses to 11 different telecommunications companies, including a previous sale to U.S. Cellular and four other agreements announced recently.

Edited by Brooke Neuman

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