With no mid-band spectrum auction on the horizon for 2019, T-Mobile US Inc. believes the fastest path for nationwide 5G wireless service relies on the company's pending deal with Sprint Corp. — an argument that may not convince key regulators, though it holds water for many spectrum policy experts.
During its recent earnings conference call, T-Mobile executives stressed the dearth of mid-band spectrum commercially available for purchase, with T-Mobile Chief Technology Officer Neville Ray saying the spectrum needed to drive 5G "is not coming from auctions or from other sources in any real time frame that's comfortable for anybody."
Mid-band spectrum is important for 5G since high-band spectrum cannot travel far distances or penetrate certain surfaces; low-band spectrum, which can travel great distances, has become crowded due to 4G wireless services.
Spectrum policy experts agree that the U.S. government is not moving quickly enough to free up mid-band spectrum for 5G wireless use, and they note a T-Mobile/Sprint merger would give the combined company access to a wide berth of key spectrum holdings.
 T-Mobile's Chief Technology Officer Neville Ray Source: T-Mobile US |
"T-Mobile's argument is sound. Combining the superior cash flow availability of T-Mobile with the [Sprint] spectrum assets would put them on a really strong path to build a robust 5G network," Doug Brake, director of broadband and spectrum policy at the nonpartisan public policy think tank Information Technology and Innovation Foundation, said in an interview.
Sprint has more than 160 MHz of 2.5 GHz spectrum across the top 100 U.S. markets, giving the No. 4 wireless operator one of the largest nationwide blocks of mid-band 5G spectrum available for wide-scale use in the U.S.
While the U.S. Federal Communications Commission may be influenced by T-Mobile's mid-band spectrum arguments, antitrust regulators at the U.S. Department of Justice likely will not be, Brake said. Both the FCC and the DOJ must approve the deal before it can close. The DOJ "doesn't really engage in that sort of industrial policy," Brake said.
In an April 29 interview with CNBC, Makan Delrahim, head of the Justice Department's antitrust division, said he had not made up his mind about the deal. He added that while 5G may be a deal "efficiency" that can be considered as part of the review, it must be merger-specific and verifiable.
Based on Delrahim's remarks, BTIG LLC telecom analyst Walter Piecyk said 5G arguments may be "a challenge for the companies" before the DOJ.
T-Mobile has repeatedly emphasized the critical need for mid-band spectrum in recent weeks. In an April 22 blog post, Ray said the high-band millimeter-wave spectrum Verizon Communications Inc. and AT&T Inc. have thus far used in their recent 5G launches "doesn't travel far from the cell site and doesn't penetrate materials at all." The post featured a test where a millimeter-wave signal disappeared as soon as someone stepped behind a glass door.
Part of the problem, according to Ray, is that software and technology around millimeter-wave spectrum are still in the early stages. But even after the technology advances, Ray believes the physics of millimeter waves — so-called because of their narrow wavelengths — mean that this high-band spectrum will never be suitable for deployments beyond small pockets of dense urban areas.
Doug Dawson, president of the telecom consulting firm CCG Consulting, agreed with Ray's assessment of the high-band spectrum. "Everything in the world stops it. If you have just one cell site and you turn your back on it, your body blocks the signal. You don't even have to go behind glass," Dawson said in an interview.
The result is that millimeter-wave spectrum requires the deployment of multiple transmitters or small cells within the range of several hundred feet. "We're just not going to build that kind of network except in the center … of the big cities," Dawson said.
Verizon, according to MoffettNathanson telecom analyst Craig Moffett, is "more closely tied to millimeter wave spectrum than any other operator, not only in the U.S., but arguably in the world." The company addressed concerns around propagation during its own recent earnings conference call. CEO Hans Vestberg said the high-band spectrum has lived up to the company's expectations.
"We're very early on in improving the software," he said, adding that while millimeter-wave spectrum will never be used for wide coverage, the ranges are "very good" and "the throughput and speeds are enormous."
The questions around millimeter-wave spectrum are especially timely as bidding recently concluded in the FCC's 24 GHz spectrum auction, the agency's second high-band spectrum auction in recent months. While the two auctions will open up significant millimeter-wave spectrum for 5G wireless use, the commission is not expected to hold a mid-band spectrum auction in 2019.
Since 2015, the commission has been working to open up the 3.5 GHz band, having created the Citizens Broadband Radio Service to coordinate spectrum sharing between potential users and incumbent users, such as fixed satellite services and federal agencies.
"We're still in the preparatory stages for the auction for the CBRS band," FCC Commissioner Michael O'Rielly said in March, adding that an auction would likely occur sometime in 2020.
The agency has also been seeking ways to free up spectrum in what is known as the C-band, or 3.7 GHz to 4.2 GHz band, but O'Rielly said there remain "a lot of difficult issues to decide" for that band as well.
Ray sees a C-band sale or auction as "several years out," which is why he said the Sprint/T-Mobile deal is so important. "The massive opportunity with our deal is to fill that spectrum gap, especially over the next two to three years," the CTO said.