AT&T, Verizon need LightSquared

Lynnette LunaCompanies in any industry don't typically like to see more competition come their way, but I have to think that both AT&T (NYSE:T) and Verizon Wireless (NYSE:VZ) are cheering for LightSquared to succeed.

The Harbinger-backed company is building a nationwide wholesale LTE network using L-band satellite spectrum, and it is grappling with this pesky GPS situation. GPS vendors and those industries and government sectors that rely on GPS are getting louder in their protests against the FCC's move to grant the company conditional approval to build out its network. The FCC, however, won't give LightSquared permission to move ahead until it has proven LightSquared's signals, which transmit next to the GPS frequencies, don't interfere with GPS.

Then there are skeptics who point to the capital intensiveness of LightSquared's plan to cover 92 percent of the U.S. along with pointing out the fact that wholesale-only networks have yet to be proven out.

However, AT&T now needs LightSquared in its quest to receive regulatory approval to buy T-Mobile USA for a proposed $39 billion. It needs to bolster the argument that the wireless industry will remain competitive after it buys the rival operator.  

"Going forward, new competition for AT&T may come from emerging cable MVNOs who resell wireless service from Sprint/Clearwire and even LightSquared. Cox Communications is building its own wireless broadband network. Even Google is experimenting with high-speed wireless network operations. Serious new competitors are on the horizon," noted Sue Rudd, director with Strategy Analytics in recent release. "However, AT&T must prove that the deal does not have an immediate anticompetitive impact."

Meanwhile, LightSquared has signed roaming deals with regional operators Leap Wireless, Cellular South and this morning Sl Wireless, a partnership of rural independent telephone companies. Verizon Wireless and AT&T would be very happy if operators like these don't knock on their door for roaming deals if they can have the full nationwide coverage of LightSquared.

Both AT&T and Verizon were unhappy about the FCC's recent move to mandate data roaming. The FCC had found that Verizon and AT&T had engaged in few data roaming agreements on their 3G networks, and declined to commit to reaching agreements on the new LTE networks.

Smaller and rural carriers have pushed for data roaming rules to prevent the largest wireless carriers from shutting them out of nationwide broadband connectivity. Interestingly, all of the partnership agreements Verizon Wireless has made with carriers entering the LTE in Rural America program call for the operator to lease 700 MHz spectrum and build out networks to Verizon's own specs and core network. This is despite the fact that many of the rural operators it has deals with own their own 700 MHz spectrum.

In a market that could very well see AT&T and Verizon pull significantly ahead of the competition, LightSquared could become the prime example these operators point to in making the argument that the mobile industry is competitive.--Lynnette

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