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AT&T hypes disputed spectrum shortage

When AT&T (opens in new tab) announced its intentions to purchase T-Mobile, it gave as a reason its desire to acquire more spectrum to support the growing use of mobile devices.

However, AT&T already has plenty of unused wireless spectrum that it plans to use to expand its network over the next several years, and much of T-Mobile’s spectrum is already in use, so the deal won’t result in additional spectrum becoming available.

“The notion that there’s a spectrum crisis has been greatly exaggerated for (the) political purposes of a few select companies like AT&T,” Derek Turner, research director at the public interest group Free Press, told the Associated Press.

Broadcasters will be watching the details of the proposed merger closely because the FCC is insisting on TV stations giving up spectrum in auctions to free more spectrum for broadband usage. Station owners who don’t go along will possibly be taxed on the spectrum they use.

AT&T has made great strides in addressing network congestion in such cities as New York and San Francisco without tapping into its unused spectrum, instead upgrading cell towers and other equipment. However, in a conference call with investors earlier this week, Randall Stephenson, AT&T CEO, said his company is facing “impending spectrum shortages” in major markets.

“AT&T has been at the leading edge of mobile data growth on our network as a result of supporting more smart phones, more tablets, more e-readers than anyone else in the country,” Stephenson told the press and investors. “This has created an urgent need, an ongoing need, for significantly more spectrum to support this explosive demand.”

Stephenson claimed several times that the company’s mobile data volumes have increased 80-fold over four years, since the launch of Apple’s iPhone. He also said he expects data volumes to grow eight to 10 times over the next five years — a much lower rate. In fact, AT&T’s own figures show that growth is slowing down now that smart phones are in the hands of many consumers. AT&T and its chief rival, Verizon Wireless, both have a large spectrum inventory. This comes in large part because of a government auction of older analog TV spectrum in 2008. In fact, AT&T has enough airwaves that it agreed to transfer some of its spectrum holdings to T-Mobile, along with a $3 billion breakup fee, if the deal is blocked by federal regulators. Sprint Nextel, the third-largest wireless provider, also has large amounts of spectrum available through a partnership with Clearwire, of which it owns the majority. That spectrum, too, is largely unused.

FCC Chairman Julius Genachowski has denied a surplus of spectrum.

“That’s just not true,” he said at a recent conference on mobile technology in Washington, D.C. “Let’s look at the facts. Multiple expert sources expect that by 2014, demand for mobile broadband and the spectrum to fuel it will be 35 times the levels it was in 2009. The looming spectrum shortage is real, and it is the alleged hoarding that is illusory.”

The AP said that perhaps the reason AT&T agreed to pay $39 billion for T-Mobile is that it hopes to persuade many of T-Mobile’s customers to switch to smart phones, which carry higher monthly fees.

Even if the merger doesn’t increase the amount of spectrum available to U.S. mobile phone users, there are some gains to be expected in terms of the amount of data and the number of calls that can be carried. Now if AT&T’s data network is overloaded in one area, the traffic doesn’t move over to T-Mobile’s network, even if there’s spare capacity there. But, that would occur after the two companies combine.

AT&T promised that the combined network would provide LTE 4G to as much as 95 percent of the United States. The extra cell towers should provide significantly better coverage, especially indoors. But the deal cuts the competition in an already tightly consolidated industry. It also means higher prices and less choice for consumers.

The issue is now up to U.S. regulators. Both the FCC and the Department of Justice will be reviewing the proposed deal in the months ahead. No doubt, broadcasters will be watching very closely.