Spectrum Shortage: Just So Much Whining?

The battle cry of our wireless carriers to government regulators has been: Give us more spectrum or everyone's mobile bills will rise and service will fall! Not exactly "Banzai!" or "Geronimo!" or even "I'm going to count to three," but is any kind of threat even necessary?

Yes, spectrum -- which really just refers to a range of radio frequencies used by all wireless communication devices -- is commonly considered a finite resource that can only be divided up so much before those frequencies interfere with each other.

And, yes, "Spectrum is the 'life blood' of the wireless industry," as a T-Mobile statement once put it.

And, yes again, the proliferation of smartphones downloading expanding amounts of data does underscore the wireless industry's need to increase the amount of spectrum at hand.

But is it really the case, as AT&T (NYSE: T  ) CEO and ChairmanRandall Stephenson put it during the company's last quarter's earnings call, that the industry's "explosive mobile broadband growth ... cannot continue without more spectrum being cleared and brought to market" by the FCC?

The naysayers
The inventor of the cell phone and a former vice president of Motorola, Martin Cooper, is one who thinks the wireless companies are overselling the threat. He told The New York Times in an interview, "Somehow in the last 100 years, every time there is a problem of getting more spectrum, there is a technology that comes along that solves that problem." Advanced antennas and routing traffic onto Wi-Fi networks could help the carriers serve 10 times more devices, he said.

So why are the carriers going on and on about a spectrum shortage? Because it's just easier, Cooper said.

Consultant David S. Isenberg put forward a darker explanation. He told the Times that the carriers have been slow in employing more modern and efficient technologies for a reason. "Their primary interest is not necessarily in making spectrum available, or in making wireless performance better," he said. "They want to make money."

David P. Reed, senior vice president at SAP Labs, echoed that view. He told the Times that the carriers aren't as interested in the new technologies as they are in just monopolizing as much spectrum as they can.

The Great Spectrum Gobble-Up
Just after Thanksgiving last year, Verizon (NYSE: VZ  ) closed on deals with several cable companies for their hoarded spectrum caches. Verizon succeeded in getting for $3.9 billion what AT&T failed to get for its failed $39 billion attempt to acquire T-Mobile. AT&T not only lost out on grasping more of that "life blood" but also had to tap one of its own arteries and give to T-Mobile some of its spectrum as a failure-to-complete-the-deal penalty. Ouch.

Lifeblood in the water
But all of the carriers, large and small, are getting ready for a potential feeding frenzy when the FCC auctions off some spectrum that had formerly been put aside for broadcast television use. Congress passed legislation this past February that would free up those frequencies, but the wireless carriers have been positioning for months to make sure they get their fair (as viewed by each company) share.

AT&T and Verizon have both been worried that the FCC will give preferential treatment to the smaller carriers in the upcoming spectrum auctions. AT&T told the New York Post last January: "Our position is not that we are against the FCC overseeing spectrum auctions. We simply are asking why the FCC wants the Congress to strip language from a bill that says the FCC can't exclude qualified bidders."

Verizon said it was concerned with the auctions being "open and not tied down by conditions that might limit players from bidding on [the] spectrum."

The carriers that AT&T and Verizon are afraid the FCC may give preferential treatment to would be Sprint Nextel (NYSE: S  ) , Leap Wireless (Nasdaq: LEAP  ) , and MetroPCS (NYSE: PCS  ) , as well as T-Mobile and others. Some of these smaller carriers are afraid that the deeper pockets of the two largest wireless companies, if there were no bidding restraints put on them, would lessen their competitiveness.

No more whining
The solution to all this could be as simple as Martin Cooper's suggestion that instead of acquiescing to the carriers' demands for more spectrum, just require them to upgrade their technical capabilities. "Every two and a half years, every spectrum crisis has gotten solved," he said, "and that's going to keep happening."

No matter what happens with the spectrum situation, there will always be a need for mobile devices -- and the parts that make them work. The Motley Fool has released a free report called "The Next Trillion-Dollar Revolution." It details a "hidden" component play inside mobile phones that also is a market leader in the exploding Chinese market that Intel praised for leading it to success last quarter. Don't miss out on this report. Get it today, and it's free.

Fool contributor Dan Radovsky owns shares of AT&T. The Motley Fool owns shares of Intel. Motley Fool newsletter services have recommended buying shares of Intel. The Motley Fool has a disclosure policy.
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