Wireless carriers often and predictably cite a severe shortage when it comes to the airwaves cellular networks are built on. This is nothing new, even if, in some cases, the public posturing is only that; AT&T currently has approximately 40 MHz of unused spectrum, and Verizon has been known to hoard spectrum in the past. Still, making more spectrum available certainly helps the wireless industry, and spectrum is fundamentally critical to carrier competitiveness.
T-Mobile (NASDAQ:TMUS) is now asking regulators to open up more licensed spectrum.
To license use or not to license use, that is the question
Over the past decade or so, T-Mobile has become one of the biggest proponents of Wi-Fi calling, in part as a way to ease up network congestion by offloading traffic to Wi-Fi networks that operate on unlicensed spectrum bands (2.4 GHz and 5 GHz). Simply put, focusing on promoting Wi-Fi calling helped the Un-carrier make up for a weaker spectrum position, which was also holding back its network performance. That was then, and these days T-Mobile has effectively caught up in terms of network performance.
Over the summer, the FCC released plans to open up millimeter wave bands (those above 24 GHz) to forthcoming 5G technologies, but T-Mobile takes issue with the commission's emphasis on unlicensed use:
However, the Report and Order [from July 14, 2016] is heavily weighted in favor of making unlicensed spectrum available at the expense of licensed use -- of the 10.85 gigahertz of millimeter wave spectrum the Report and Order made available, only 3.25 gigahertz was made available for licensed use on an exclusive basis. While spectrum for both licensed and unlicensed uses is important, the disparity here is stark. Moreover, only a small amount of the 3.25 gigahertz of spectrum designated for exclusive licensed use will actually be auctioned, as most is already licensed to incumbent entities. Thus, potential service providers that wish to use licensed spectrum received limited potential benefit from the Report and Order.
Furthermore, T-Mobile estimates that every 10 MHz of spectrum that is licensed adds $3 billion to GDP while supporting over 200,000 new jobs. The company believes that the FCC can and should be doing more to promote wireless innovation, and wants it to make more spectrum available for licensed use. There's also a huge swath of spectrum in the 64-71 GHz band that the FCC shrugged off, but T-Mobile believes this band has a lot of potential for licensed use. The carrier notes that the same was said of the 28 and 39 GHz bands a few years ago, which were previously considered unsuitable for licensed mobile operations but are now considered "desirable" bands for licensed mobile operations.
5G promises to be the next frontier of wireless innovation, and an important competitive battleground for the wireless carriers. T-Mobile laid out its vision for 5G's potential in September, hoping to enable things like real-time augmented reality navigation and real-time language translation, among others.
The technology is still in the early stages of development and years away from deployment, but the carriers (including T-Mobile) need to make sure they have the spectrum to make it happen.
Evan Niu, CFA, has no position in any stocks mentioned. The Motley Fool recommends T-Mobile US and Verizon Communications. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.