Future spectrum auctions, a shift toward usage-based pricing for mobile broadband and the evolution of application-based wireless services could hamstring wireless operators' balance sheets and cash flows, according to a new report from Fitch Ratings.
The ratings service's biannual wireless report said AT&T Mobility and Verizon Wireless likely have the scale, market power and resources to handle the changing dynamics of the wireless industry reasonably well. However, the report said, smaller wireless players likely will face greater financial risk in the coming years.
It's unclear whether Verizon and AT&T have enough flexibility in their credit ratings to absorb more spectrum purchases, the report said. In 2008, Verizon spent $9.36 billion and AT&T spent $6.6 billion on 700 MHz spectrum for their respective LTE networks. The FCC's national broadband plan aims to free up 500 MHz of spectrum over the next 10 years, with 300 MHz of that opened up in the next five years.
Additionally, both carriers, which have experienced strong growth in wireless data revenues, have indicated that the industry is transitioning toward usage-based pricing for mobile broadband, which could potentially disrupt revenue streams, since many U.S subscribers have grown accustomed to flat-rate pricing for mobile broadband.
The report also said that it will be critical for cable companies that are wholesale partners of Clearwire--including Comcast and Time Warner Cable--to demonstrate that they can effectively bundle wireless broadband service with their current service offerings to counter the wider trend toward mobile broadband in general.
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