AWS spectrum: The capacity savior for LTE?

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Mike Dano


Verizon Wireless' (NYSE:VZ) plan to purchase a massive swath of spectrum from Comcast, Time Warner Cable and Bright House Networks helps to shine a light on the AWS side of LTE, which likely will gain increasing importance in the years to come.

But why is the AWS spectrum band important for the rollout of LTE network technology in the United States? To date, most noise on the LTE front has been in the 700 MHz band. Verizon's massive LTE network runs exclusively in its 10 MHz of nationwide of 700 MHz C Block spectrum, and Verizon Wireless' LTE devices currently only support this C Block band. As for AT&T Mobility (NYSE:T), much of carrier's LTE rollout so far has leveraged the company's B and C Block 700 MHz spectrum.

But AWS spectrum (1710-1755 MHz and 2110-2155 MHz) is also in the mix for LTE. Portions of MetroPCS' (NYSE:PCS) LTE buildout sit in the carrier's AWS spectrum (MetroPCS' first LTE market, Las Vegas, runs on 5 MHz of AWS). And AT&T's LTE devices support both 700 MHz and AWS bands for LTE. (An AT&T representative declined to discuss whether the carrier has launched any commercial AWS LTE markets.) And if its deal with SpectrumCo is approved, Verizon will probably use SpectrumCo's AWS licenses to catch expected spillover in LTE traffic.

To be clear, Verizon Wireless already owns some AWS licenses (see this chart for details). But Verizon's purchase of SpectrumCo's AWS licenses represents a $3.6 billion bet that the carrier's current 700 MHz and AWS holdings won't be sufficient to meet LTE users' data demands.

Verizon's SpectrumCo deal "suggests their [spectrum] needs are perhaps greater and more immediate than previously thought," wrote Credit Suisse analyst Jonathan Chaplin in a recent research note.

A Verizon representative declined to provide details on Verizon's AWS plans, including when the carrier plans to add AWS support in its LTE devices.

A number of analysts have noted that carrier aggregation technology could allow Verizon, AT&T and others to essentially glue together their 700 MHz and AWS radio waves for LTE, thereby significantly boosting their LTE download speeds. AT&T has already said it plans to use carrier aggregation technology to combine its existing 700 MHz spectrum with the 700 MHz D and E Block spectrum it hopes to acquire from Qualcomm (NASDAQ:QCOM).

However, Michael Thelander, CEO and founder of Signals Research Group, said carrier aggregation technology probably won't become available until 2014, and he believes Verizon probably will need to add capacity to its 700 MHz LTE network sometime in 2012 or 2013. Thus, he expects Verizon to launch LTE on its AWS holdings sometime in the next year or two, and to combine its 700 MHz and AWS spectrum via carrier aggregation at some point after that.

In fact, Thelander said AT&T's spectrum requirements are more pressing, which is why AT&T's LTE devices already have both 700 MHz and AWS built in. He said AT&T in some markets only has 5 MHz of 700 MHz spectrum, which he said isn't enough spectrum to support large amounts of heavy data users.

"They really need AWS much more," Thelander said of AT&T. "They need it and they need it quickly."

Thus, AT&T's current $6 billion breakup contract with Deutsche Telekom could create serious problems for AT&T's LTE future. According to the terms of the agreement, if AT&T isn't able to finalize a deal with T-Mobile USA, it will be required to transfer to T-Mobile "certain AWS spectrum that is not needed by AT&T for its initial LTE rollout." If AWS spectrum is as important to LTE as Verizon seems to think it is, AT&T's breakup contract seems even worse than it did when the agreement was first announced. +Mike Dano