Analysis: For AT&T, It’s All About The Spectrum

WASHINGTON March 29, 2011 – With the acquisition of T-Mobile, AT&T may be not only solving a long standing question about where it would find the spectrum to deploy its planned 4G network, but also make a leap in its public image.

Currently, AT&T uses a band of spectrum not supported by any other carrier in the world, meaning handsets must be specially made for the carrier. Both T-Mobile and AT&T use the same base technology, but the two carriers run their 3G networks on different bands of spectrum. The acquisition of T-Mobile would greatly increase the amount of spectrum and infrastructure that AT&T would possess, bringing service to a greater number of Americans.

For example, T-Mobile is currently far ahead of AT&T on building HSPA+, an intermediate 4G technology that fits right between the carriers’ existing 3G networks and Long Term Evolution (LTE) technology. Immediately, AT&T  would be able to improve it’s current 3G speed and coverage by redeploying the infrastructure to speed up and widen its 3G coverage.

Long term, AT&T has focused on building its next-generation LTE infrastructure, but has fallen behind Verizon in actually deploying the technology. If the T-Mobile acquisition goes forward, AT&T would be able to re allocate the spectrum it acquires from T-Mobile and expand its LTE service more rapidly,  closing the gap that Verizon is currently widening.

AT&T confirmed this plan in a call with investors following the announcement of the potential acquisition. The company’s roadmap calls for eventually moving T-Mobile’s subscribers off the 1700 megahertz  3G spectrum they currently occupy.  AT&T will then combine this spectrum with other availible spectrum it already owns to make LTE service available to an estimated 95 percent of Americans. The projected roadmap calls for this network to be fully in place by 2013, making the deal imperative to AT&T’s competitiveness, as spectrum is a large part of what has been missing from the carrier’s past plans.

Spectrum, therefore, is the keystone to AT&T’s future. The company’s plan to acquire T-Mobile utilizes the current assets T-Mobile possesses that will improve and expand AT&T’s network and give a definite shape shape to it’s future plans. AT&T suffered blows to its public image in the last year from numerous directions: losing iPhone exclusivity, the unpopular introduction of capped data plans, and repeated issues with call reliability. The acquisition of T-Mobile would allow AT&T to cultivate an image of a faster, newer network with a larger amount of available spectrum, possibly placing it ahead of its closest competitor Verizon.

Although he declined to comment specifically on the deal, FCC chairman, Julius Genachowski, echoed his long held sentiment about the importance of spectrum while at the CTIA Wireless trade show in Orlando last week: “Spectrum is the oxygen that allows all of these mobile innovations to breathe. Whether or not most Americans know the physics of spectrum, they know what it feels like to have a dropped call or a slow connection or cranky Wi-Fi.”

And it looks like that is what this deal is about: AT&T’s need for more spectrum both technologically and in the public perception.