Verizon Wireless found a buyer for more of its unwanted 700MHz wireless spectrum.
On Tuesday, Verizon announced it has struck a deal with regional carrier U.S. Cellular to sell its 700MHz A block spectrum licenses in Oklahoma City and in 31 surrounding counties. The licenses cover roughly 1.9 million potential customers. Terms of the deal were not disclosed. The Federal Communications Commission must still approve the transaction.
Verizon acquired some 700MHz licenses in the lower A block in various markets during the FCC's 2008 auction. It also bought the nationwide 700MHz in the upper C block. Verizon has used the upper C block 700MHz to build its nationwide 4G LTE network. Because the band plans are different for the lower A block and the upper C block 700MHz spectrum, Verizon cannot easily integrate this spectrum into its network.
The lower A block spectrum also has some potential interference issues with adjacent TV broadcast services, which has made it difficult for other A block licensees to deploy services in this block.
As a result, Verizon has been selling off this spectrum over the past year. Since 2011, Verizon has sold or has agreed to sell 37 of its lower 700 MHz spectrum licenses to 11 different telecommunications companies. This includes a previous sale to U.S. Cellular.
In April last year, Verizon said it would sell this spectrum if the FCC approved its plan to buy 20MHz of wireless spectrum from cable operators. But the offer didn't sway regulators, who were more concerned about Verizon's higher frequency wireless spectrum holdings.
A few months later, Verizon offered to sell some of its AWS spectrum to T-Mobile. That deal seemed to seal the deal for regulators. In August, the Department of Justice and the FCC approved the deal.
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Why is Verizon selling any spectrum at all if there's a spectrum crunch?The answer is simple. Not all wireless spectrum -- even 700MHz spectrum -- is created equal. When deploying new wireless services it's important to have a mix of low-frequency spectrum and high-frequency spectrum. Low-frequency spectrum, like the 700MHz band, allows signals to propagate over longer distances and can penetrate obstacles like walls. This means a carrier can cover a region with fewer towers.
Higher-frequency spectrum, which transmits signals over shorter distances, offers more capacity at shorter ranges. The AWS spectrum that Verizon bought from the cable companies, which spans 1710MHz to 1755MHz for uplink, and from 2110MHz to 2155MHz for downlink, is higher frequency.
As explained above, Verizon already uses 700MHz from the upper C block. So it doesn't really need the lower A block 700MHz licenses. What's more, as I mentioned before, the A block spectrum has some interference issues. And because AT&T, which has some B block licenses in 700MHz has carved out the B block into its own spectrum band, A block licenses have been isolated. And there are only a limited number of devices and equipment available for 4G LTE services that use this sliver of spectrum.
Why would U.S. Cellular want this spectrum?
U.S. Cellular, which also bought 700 MHz lower A block spectrum in the 2008 FCC auction, has already begun deploying 4G LTE services using A block licenses. So the spectrum that Verizon is selling is a good fit for U.S. Cellular.