Even though Covid-19 prompted all kinds of spectrum lease deals, Dish Network and T-Mobile were unable to agree to terms on a longer term lease for 600 MHz spectrum as required by the Department of Justice (DoJ) in T-Mobile’s merger with Sprint.
So, the decision reverted to the DoJ, and analysts at LightShed Partners report that while the DoJ followed through on executing the terms of the lease deal, it triggers the FCC’s spectrum screen. They speculate Verizon might be gearing up to use that to limit T-Mobile’s participation in the upcoming C-band auction, a suspicion they raised after the winners of the Citizens Broadband Radio Services (CBRS) auction were announced.
Verizon already brought up the spectrum screen when it complained about a 600 MHz spectrum lease deal that T-Mobile completed with Columbia Capital earlier this year. Although Verizon doesn’t mention its deep holdings in the millimeter wave (mmWave) bands, it points to T-Mobile’s massive lead in low- and mid-band spectrum in populated Partial Economic Areas (PEAs) where T-Mobile is obtaining even more spectrum through lease arrangements. T-Mobile often boasts it has more low- and mid-band spectrum for 5G than Verizon and AT&T combined.
The spectrum screen was developed years ago by the FCC as a way to evaluate secondary market transactions, in part so that no one entity ends up ruling the nation’s airwaves. Interestingly, there was a point in 2014 when Verizon took Sprint to task over the fact its vast stock of 2.5 GHz spectrum acquired from Clearwire wasn’t included in the spectrum screen. That treasure trove of 2.5 GHz now lies in T-Mobile’s hands.
While financial terms of the Dish/T-Mobile lease deal were not disclosed, the LightShed analysts said their best guess is that T-Mobile will be paying Dish less than $100 million per year under the new lease terms. The belief is these payments will aid in Dish’s pending network buildout, they wrote in a blog last Friday.
According to the companies’ public interest statement, the lease will enable the 600 MHz frequencies in question to be used immediately rather than waiting for Dish to build out its network. T-Mobile can use the spectrum to meet high data demands, including those triggered by the Covid-19 pandemic.
The companies’ statement acknowledges that the leasing arrangement will cause T-Mobile to either trigger or increase its overage above the spectrum screen in many markets, but says the screen is not a finding of competitive harm – “merely a processing tool for identifying situations in which competitive concerns could arise.” The commission has “repeatedly found that spectrum leases or acquisitions exceeding the screen are pro-competitive and in the public interest where the spectrum would facilitate the buildout of next generation networks, improve service to customers and put fallow spectrum to use,” it states.
The public interest statement further notes that given the substantial spectrum holdings of T-Mobile’s rivals, “there can be no realistic concern that the proposed leasing arrangement is anti-competitive or somehow forecloses these rival providers from access to spectrum.” AT&T or Verizon owns one of the two 800 MHz cellular licenses in every cellular market area (CMA), and AT&T and Verizon collectively own both of the cellular authorizations in 143 of the 153 CMAs.
“Because these companies have had three decades or more to develop their coverage with the extended propagation benefits of low-band spectrum, their coverage in all of these markets should be as near complete as economically justifiable,” according to the public interest statement.
Dish and T-Mobile both declined to comment beyond the public interest statement.
In their analysis of the DoJ’s terms, the LightShed analysts found that T-Mobile’s leased markets only represented 30% of the population, indicating the largest markets were excluded. In fact, they found the DoJ assigned a lease to only two of the top 10 markets and seven of the top 20.
Those seven markets include New York and Miami but do not include Los Angeles and Washington, D.C. “The narrower than expected spectrum lease results in T-Mobile owning 30 MHz or less of this spectrum band in half of the top 40 markets,” including San Francisco and Atlanta, the analysts wrote. “At the end of the Dish and Columbia Capital leases, T-Mobile will be left with its original holdings of 30 MHz or less in all of the top 40 markets.”
The LightShed analysts suggest T-Mobile should approach other 600 MHz spectrum owners, including U.S. Cellular and Bluewater Wireless, to bolster its low-band spectrum positions. They also think T-Mobile should buy the large amount of 2.5 GHz spectrum it doesn’t own in and around New York City, which could be structured as a lease.
“T-Mobile is clearly concerned about how this lease term might impact its spectrum screen, as a large portion of the public interest filing was dedicated to this item,” wrote Walter Piecyk and Joe Galone, referring to that earlier filing where Verizon raised spectrum screen questions. “We suspect that the comments in T-Mobile and Dish’s public statement were triggered by that filing and we still wonder if Verizon is gearing up to argue that T-Mobile should not be permitted to bid in the C-Band auction, given its already very deep mid-band spectrum holdings.”
Verizon has long been expected to play aggressively in the C-band auction – after all, of the Big 3, it’s the carrier with the least amount of mid-band spectrum for 5G – but T-Mobile has fought valiantly throughout the C-band proceeding, before and after its merger with Sprint closed April 1. T-Mobile might have enough mid-band spectrum for now, but given it’s desire to leave rivals in the dust, it’s no doubt going to give Verizon a run for its money wherever and however it can.
In fact, T-Mobile is forging ahead with C-band 3.7-3.8 GHz tests in markets across the country. The FCC on August 31 granted T-Mobile’s request for special temporary authority (STA) to conduct tests in and around Las Vegas, Houston, Phoenix, New York City and Bellevue, Washington. The operator plans to evaluate the use of the lower portion of the C-band for 5G while coordinating with earth stations in those areas.
Meanwhile, the FCC granted Dish an extension of time to build out on its AWS-4, lower 700 MHz E block and AWS H block licenses through June 14, 2023, and its license term for 600 MHz remains at June 14, 2029, but it no longer faces an interim buildout deadline of June 14, 2023, noted New Street Research policy analyst Blair Levin.
Instead, the FCC set a 5G service offering mandate of at least 75% of the population in each PEA by June 14, 2025. The Rural Wireless Association and Communications Workers of America (CWA) had filed in opposition. “The extensions were never in significant doubt but the extension does remove a regulatory cloud that concerned investors,” Levin wrote in a September 13 report.