It’s been a busy day in the telecommunications world. A few hours after Dish Network today announced its $25.5 billion bid for Sprint, the Wall Street Journal reported that Verizon offered to buy Clearwire spectrum leases for $1.5 billion.
Demand for wireless spectrum is at an all-time high. The shortage of it is the reason for dropped calls, streaming glitches and other annoyances. Besides cursing out your network carrier, there’s another culprit: The US government, which controls the airwaves and licenses spectrum for commercial use.
The last time there was a major auction for spectrum was 2008. So instead, mobile phone companies have been scrambling to buy existing spectrum from each other and from cable companies. In January, AT&T bought spectrum from Verizon for $1.9 billion. Last year Verizon bought $3.9 billion worth of spectrum from cable companies.
Mobile phone companies have long complained that the US Federal Communications Commission (FCC) isn’t auctioning spectrum fast enough. But companies also have a lot of spectrum they aren’t fully using. And other tech firms like Google and Microsoft have lobbied for saving some wireless spectrum for mobile services that haven’t been invented yet.
The FCC is trying to make more spectrum available, but wants to do it in a way that gives more people access to high speed internet. Next year, TV broadcasters will put spectrum up for sale in a complex arrangement and share in the proceeds with the government, which should help in the spectrum crunch.
But the US Justice Department has warned the FCC that it shouldn’t let the two largest mobile phone carriers, Verizon and AT&T, dominate the auction, but that smaller carriers like T-Mobile and Sprint, which have also been scrambling for spectrum, should also have a shot. That has caused TV stations to worry that the spectrum sale could fail because companies that have the resources to bid, like Verizon, are being discouraged.
T-Mobile will be helped out on the spectrum front by its proposed merger with Metro PCS. Sprint has been trying to increase its own spectrum holdings by acquiring the rest of Clearwire that it doesn’t already own. Dish has the opposite problem in that it has spectrum but needs a cell carrier, which is why it is going after Sprint. Japan’s Softbank already has a deal to acquire Sprint and it will be tough for Dish to break up that transaction. Dish also tried to thwart Sprint’s Clearwire bid.
One of the few mobile phone companies that has yet to join in the musical chairs is Leap Wireless. It has held merger talks with various parties, like AT&T. But it is the seventh-largest wireless carrier in the US and doesn’t have enough spectrum to solve the holes for its bigger rivals. That means so far, Leap doesn’t have a dance partner. But it’s still looking.
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