T-Mobile’s 2.5 GHz spectrum is not as locked down as most people might think it is.
It turns out T-Mobile leases, but does not own, much of its 2.5 GHz spectrum. And at least one private investment firm is reaching out to the owners of the spectrum and making offers to buy it.
T-Mobile is always bragging about its “layer-cake” spectrum position with a good combination of low-band, mid-band and high-band spectrum. It’s particularly prone to boast about its mid-band 2.5 GHz spectrum, which it inherited from Sprint. This spectrum is giving it a big advantage over AT&T and Verizon because T-Mobile is currently deploying 5G on its 2.5 GHz spectrum while its competitors have had to scramble to acquire comparable mid-band spectrum (C-band), and they’re running behind T-Mobile in deploying 5G.
But most of T-Mobile’s 2.5 GHz spectrum is leased from about 1,100 different educational institutions in the U.S., which own just shy of 2,000 licenses for the spectrum. These organizations got the spectrum decades ago. It's dubbed Educational Broadband Service (EBS) spectrum.
Now, at least one investment company — WCO Spectrum — is trying to buy the EBS licenses.
A spokesperson for WCO wrote to Fierce, “WCO Spectrum’s mission is to level the playing field for EBS license holders and empower them to make the decisions that are right for their educational organizations and the students and communities they serve.”
Carl Katerndahl, managing partner of WCO Spectrum’s parent firm Winnick & Company, made a video presentation in October 2021. At that time he said WCO was “in active communications with more than 200 entities right now of the 1,100 broadly.”
Katerndahl said WCO’s executives have extensive experience in finance, telecom and philanthropy. In fact, WCO Chairman Gary Winnick founded Global Crossing in the late 1990s. Coincidentally, T-Mobile's former CEO John Legere was the CEO for Global Crossing from 2001 to 2011.
WCO decided to get involved in the EBS license landscape “because we think it’s a great opportunity for schools to monetize” their EBS licenses, said Katerndahl. The investment firm also sees a financial opportunity in owning the licenses and managing the leases.
Christian College of Georgia
WCO's insertion of itself into the EBS ecosystem has come into the news lately because of a situation with the Christian College of Georgia.
WCO approached the college with an offer to buy its 2.5 GHz spectrum in the Athens, Georgia, area for $5.526 million. James Johnston, legal counsel for the college, told Fierce that when Christian College received the offer from WCO, it reached out to T-Mobile and asked if the carrier would like to match the offer in order to buy the spectrum. Instead, T-Mobile offered $1 million to purchase the license. And it also told the college it did not have the right to sell the license to WCO.
Johnston said he can’t reveal whether or not T-Mobile has a right of first refusal to buy the license.
Evan Carb, principal of his own law firm in the Washington, D.C. area, said, “Generally, all EBS leases that any company ever did contained rights of first refusal.”
Johnston said Christian College cannot afford to engage in a lawsuit with T-Mobile. “If T-Mobile filed a lawsuit against Christian College it would go bankrupt,” he said. “They’re just so big, and all these are just tiny little school districts.”
Instead, Johnston has taken Christian College’s dispute with T-Mobile to the Federal Communications Commission (FCC) where he’s made several filings on the school’s behalf, asking for clarification.
The college argues that the 2019 decision by the FCC to free up EBS licenses gives the owners the freedom to sell their licenses. All of the lawyers that Fierce spoke with agree with this interpretation.
Carb said the 2019 FCC rule changes for EBS spectrum did two major things. “They removed all the educational requirements from the band, and they allowed them to sell to commercial entities.”
Speaking at its October 2021 video presentation, WCO’s Katerndahl said, “As of April 27, 2020, the FCC has allowed the ability for schools to monetize their asset.” WCO keeps a counter on the home page of its website, tracking all the EBS spectrum licenses that have been sold since April 2020. As of this writing, there have been 135 transactions.
In filings with the FCC T-Mobile claims the lease contract with Christian College prohibits it from selling its licenses to a third party. And T-Mobile says the FCC is not the appropriate forum to resolve contractual disputes.
In its most recent filing on January 27, Christian College counters, “T-Mobile’s thread of reasoning is: If the license is sold, T-Mobile will not be able to use the leased capacity. This is a non sequitur. A sale of the license in and of itself doesn’t affect T-Mobile one wit. Christian College would simply assign its rights (the rent) and obligations (letting T-Mobile use the spectrum) to the buyer.”
This issue between T-Mobile and Christian College may be just the tip of the iceberg of potential problems for T-Mobile.
Christian College says it is not the only licensee fighting with T-Mobile about the sale of EBS licenses. In its January 27 filing, the college mentions a license dispute between T-Mobile and Albright College in Pennsylvania. And there is also a dispute between T-Mobile and La Roche University in Pennsylvania.
Andreas Bitzarakis, director of broadband spectrum with another spectrum broker — Select Spectrum — said each educational institution will need to look at its individual leases with T-Mobile because they are not all the same.
A little background
In the 2005-2007 time frame, Sprint leased much of the spectrum owned by educational institutions across the country, according to Barlow Keener, a telecom lawyer with the law firm Womble Bond Dickinson. And, of course, T-Mobile purchased Sprint in 2020 and became the legal holder of those leases.
Many of these leases are for 30 years, and they will expire in the 2035-2037 time frame, according to Keener. This means that no matter what happens in the legal disputes between T-Mobile and the educational institutions, starting in 14 years, T-Mobile could begin losing access to the spectrum. Keener said that in the grand scheme of owning and operating a wireless network, 14 years is not that long of time.
Why doesn’t T-Mobile simply buy the licenses from the educational institutions that are considering selling? This would remove WCO and other spectrum brokers from the equation, locking down the 2.5 GHz spectrum permanently.
Fierce asked T-Mobile this question, but the carrier declined to comment.
Carb said, “I assume they’re content with the lease arrangements they already have. But I think their hand has somewhat been forced.”
It’s likely that the enormous expense of buying out 2.5 GHz licenses from educational institutions is not something T-Mobile has budgeted for in the immediate future. Or perhaps T-Mobile doesn’t need the spectrum as much in some areas compared to others.
WCO’s Katerndahl said, “We're hoping to be disruptive." The company believes this is a unique time and opportunity to help educational institutions get capital from non-essential assets. At the same time, WCO would become the new landlord of the spectrum, reaping the lease payments, and remaining the permanent owners of the licenses when the T-Mobile leases expire.
T-Mobile’s got problems, but so does the EBS auction
When EBS spectrum was first distributed to educational institutions in the 1980s, the licenses were granted in 35-mile-radius circles. This has turned out to be a very bad way to divvy up spectrum. The circles leave oddly-shaped white spaces where no one owns the spectrum.
To try and remedy this, the FCC is planning to auction the white spaces at some point in the future. Since the 2.5 GHz spectrum has turned out to be so ideal for carriers’ 5G networks, it’s important that all the spectrum is used, rather than leaving the fallow white spaces.
It is largely assumed that T-Mobile would be the primary (possibly only) bidder in a future white spaces auction. It would benefit from a seamless mid-band layer with no white-space gaps.
But if the FCC wants a competitive auction, it will need to entice other bidders such as Verizon and AT&T and possibly spectrum brokers.
The carriers are now saying they need to see T-Mobile’s current EBS leases in order to make informed decisions about bidding on 2.5 GHz white spaces. Johnston with Christian College of Georgia said Verizon and AT&T “have started bringing up my issue in big rulemaking proceedings.”
If the spectrum is all chopped up between different carriers and spectrum brokers in circle shapes or odd cookie-bite shapes, it will become difficult to place and operate base stations at the spectrum borders.
The FCC is going to have its hands full dealing with the EBS spectrum. It has to figure out how to sort out the leases between the educational institutions and T-Mobile. And it’s got a Herculean task to figure out how to maximize the use of 2.5 GHz spectrum across the U.S., garner the most money from a spectrum auction and mediate the disputes among the carriers.