Some experts expect the scramble among wireless companies for spectrum -- the industry's prized resource -- to intensify, regardless of the squabbles within the industry.
Verizon Wireless , the wireless arm of Verizon Communications Inc. (NYSE: VZ), has been pleading its case for federal approval on a $3.6 billion deal to acquire unused wireless spectrum from the cable TV operators Comcast Corp. (Nasdaq: CMCSA, CMCSK), Time Warner Cable Inc. (NYSE: TWC), and Bright House Networks . Wireless rivals such as T-Mobile USA have sought to block the deal, which they say would hurt competition.
The finite nature of spectrum means such battles can reshape the growth prospects for wireless companies. Spectrum “will always be constrained,” said Robert Rosenberg, president of Insight Research Corp. “It’s precious and always will be.”
Investing more in technology and infrastructure could make spectrum use more efficient, but Rosenberg said wireless companies feel more comfortable when they have more spectrum at their disposal. “You could delay the capital expense of subdividing and putting up more [cell] towers.” More spectrum offers carriers a lower-cost way to keep customers satisfied (at least for now) than squeezing more data and voice traffic through their current networks.
With wireless traffic growing more data-heavy, networks will bear even heavier burdens in the future, Rosenberg said. “I don’t think we’re scratching the surface yet in terms of change for telecommunications.” Video calling services such as Microsoft’s Skype and Apple’s Facetime have not yet caught on with the majority of the public, but the medium may eventually become ubiquitous. “We’re going to have full-blown, right of the box visual communications.” And wireless networks will need to find ways to handle those video calls, as well as other data streams. “The more spectrum you have, the easier that is to do.”
More spectrum also allows providers to offer new features and services to customers faster. As a result, Verizon’s competitors view its deal as a threat, Rosenberg said. “It puts them in a more vulnerable position.”
The anxiety is easy to understand. Time Warner, Comcast, and Bright House formed the joint venture SpectrumCo LLC to sell 122 wireless spectrum licenses to Verizon Wireless for $3.6 billion. The deal calls for Verizon to sell the cable companies’ products and services to its customers, and vice versa. Comcast, as the majority owner of SpectrumCo, stands to gain $2.3 billion. Time Warner would get $1.1 billion, and Bright House would get $189 million.
Wireless companies are not only wrangling with one another over spectrum these days. Last week, the National Telecommunications and Information Administration, an agency of the Department of Commerce, issued a report on the potential for converting a chunk of federally controlled spectrum to commercial use.
Verizon cited the report as evidence of the need for more capacity to accommodate customers. The company said there would be technical hurdles for commercial entities to make use of government spectrum, though it remained firm in its stance that more breathing room is necessary. “The key to continued innovation and growth in the wireless industry is the government’s commitment to ensuring that sufficient spectrum is available to meet the expanding needs of consumers,” Tom Tauke, Verizon’s executive vice president for public affairs, policy, and communications, said in a press release.