Earlier today AT&T announced details of its new proposal with SiriusXM to resolve disagreements over how to deploy mobile broadband in the WCS band. AT&T is the largest holder of WCS spectrum, with about 4B MHzPOPs of spectrum, and NextWave is the second biggest holder. However, there is a difference in usability within the WCS spectrum between the C&D blocks (unpaired 5MHz blocks) that are immediately adjacent to the 2320-2345MHz satellite radio (DARS) band (and so have a much higher risk of causing interference with satellite radio receivers) and the A&B blocks (each a paired 2x5MHz channel) which are further away from the DARS band.
AT&T and Sirius’s proposal would sharpen this difference by prohibiting mobile use of the C&D blocks, while further liberalizing use of the A&B blocks. As a result, AT&T would then have between 10MHz and 20MHz of usable A&B block spectrum over roughly half the country. The result of this proposal would likely make NextWave’s life more difficult (because nearly half of its WCS holdings are in the C&D blocks), thereby potentially giving AT&T a chance to pick up additional A&B block WCS spectrum.
However, what is particularly intriguing about the details of AT&T’s submission is the proposal that it should be allowed more flexibility to deploy FDD technologies such as LTE, with downlinks in both halves of the WCS A and B blocks. In other words, AT&T would gain yet more downlink spectrum, in addition to the Qualcomm 700MHz spectrum that it acquired last year “to allow support of asymmetrical data bandwidth allocation”. Of course, the obvious unanswered question is where would the uplink spectrum to be paired (under the proposed FDD configuration) with both the Qualcomm and WCS A&B block spectrum come from?
What AT&T needs is a clean block of paired spectrum for an LTE Advanced deployment so that the Qualcomm and WCS spectrum can be used as carrier-aggregated downlinks. When it proposed the Qualcomm transaction, the scenario that AT&T advanced was to use the AWS band to serve this purpose, but of course that is now off the table with the collapse of the T-Mobile takeover. As I’ve noted before, the Qualcomm transaction alone therefore provides a pretty compelling reason for AT&T to be interested in buying DISH.
However, another fascinating possibility is that perhaps Moelis’s assertion last week that LightSquared’s spectrum would still be worth a considerable amount of money if used on an unpaired basis (i.e. as uplink only spectrum) might be grounded in something more than wishful thinking. Indeed Moelis cites the potential for at least some of LightSquared’s spectrum (the 1670-75MHz block leased from Crown Castle) to be paired with other spectrum blocks through carrier aggregation “similar to AT&T’s planned usage of Qualcomm’s 700MHz spectrum” and I’m told that this possibility has been explored with AT&T in recent months.
Of course, GPS interference concerns in LightSquared’s satellite band would still need to be resolved, and LightSquared would still need to pay for leasing spectrum from Inmarsat (according to Moelis’s figures the lease payment if the full L-band band is usable has now been increased to $145M p.a. from April 2014 under the revised agreement struck with Inmarsat in April). Even then, uplink spectrum is generally worth much less than downlink spectrum, both because there is a need for additional downlink spectrum due to traffic asymmetries and, as LightSquared found out to its cost, interference concerns can be more problematic in downlink spectrum.
As a result this severely undercuts Moelis’s argument that LightSquared should be able to attribute the same valuation to its spectrum whether it is used for uplinks or downlinks (not to mention the use of comparisons based on recent sales within the well established and widely deployed AWS-1 band). However, this possibility does at least raise the question of whether AT&T’s acquisition plans (which are intended to give it enough spectrum for the next five years) include options other than buying both DISH and Verizon’s 700MHz B block spectrum.