As consumers, our primary criteria in selecting a mobile network operator would likely encompass three key attributes: low-cost contracts, widespread network coverage, and high-speed data transfer. In the U.S, leading carriers AT&T and Verizon Wireless (VZW) drive strong competition in each of these areas and, with strong network buildout, have achieved a competitive advantage in the market against their smaller rivals. The recent release of Apple’s 3rd. gen. iPad with support for only these two carriers underscores this disparity between top-tier leaders AT&T and VZW and smaller players in the market (e.g. Sprint Nextel, T-Mobile). While US economic policy promotes healthy competition in all markets, we have yet to see significant criticism from the public against these leading players, nor from the government (aside from prohibiting the AT&T – T-Mobile merger). VDC believes we may see this change in coming months, as controversy around 4G markets, especially in the 700 MHz band, plays out.
The 700 MHz band has presented countless challenges for our nation’s governing bodies, including the FCC, Congress, and Executive leaders. This spectrum was made available for mobile networks after the passage of the Digital Transition and Public Safety Act of 2005. After allotting spectrum to Public Safety (for buildout of a nationwide public safety communications network), FCC auctions saw a sizeable amount of spectrum fall into the hands of Verizon Wireless, with AT&T gathering the next largest share. The broadcast-attractive physics of this portion of the network (including superior penetration of walls and physical objects) have been a huge factor in driving Verizon’s buildout of a high-speed, advanced 4G network. Again, though smaller players in this market have contested the fairness and true competitiveness of the market, many consumers now recognize enhanced coverage and faster data communication – we, as consumers, thus have little reason to object.
Yet, this comfortable condition enjoyed by many consumers, may be in a state of transition. Below, we have shown the current breakdown of the 700 MHz band, identifying blocks of spectrum and their owners. We have also illustrated what are known as the “band classes” within the 700 MHz band. While regulations demanding interoperability of mobile devices have forced network operators to allow other carriers’ devices to utilize their spectrum when roaming, AT&T and Verizon attest that this would not be feasible in the 700 MHz band, and would jeopardize the quality of their network with radio wave interference. Thus these market leaders have requested of hardware manufacturers that LTE devices be designed to run only within a single band class in the 700 MHz band of spectrum. Smaller players, which generally lack nationwide coverage and network buildout, thus lack means to support and bolster their network coverage, and have also faced steeper prices for device hardware as they lack the scalar purchasing advantages of VZW and AT&T.
4G networks, and the data speeds enabled by these networks, have already recognized strong demand in the mobile markets. As we see this trend continue, players such as T-Mobile, Sprint, and Metro PCS will increasingly be at a disadvantages as they attempt to compete in the market. Recognizing this challenge, and these carriers’ objections, the FCC has integrated the question of interoperability in the 700 MHz band into their agenda for their next meeting on Wednesday, March 21. The results of this conference will send a signal to these carriers and the market, of the FCC’s inclination to interfere in these markets. The FCC’s treatment of this issue may also foretell the likelihood of spectrum caps being placed on the market leaders in future auctions of wireless spectrum.