For those not familiar with John Legere, he is the colorful CEO of T-Mobile (NASDAQ:TMUS). T-Mobile has been wildly successful over the past few years, handily outperforming the duopoly of Verizon (NYSE:VZ) and AT&T (NYSE:T), which Legere lovingly refers to as "Dumb and Dumber." T-Mobile has built its success upon more customer-friendly pricing and simplicity, its unlimited plans, and a playful marketing angle as the "un-carrier."
In 2017, T-Mobile purchased large amounts of 600 MHz low-band spectrum, which the company believes will greatly enhance its coverage and bring its network on par with the industry top dogs; however, Legere made an even bolder statement right out of the gate Jan. 2 regarding 5G, the next generation of mobile networks that many believe will be the great leap forward in connectivity.
Legere claimed T-Mobile would "leapfrog" both Verizon and AT&T in rolling out a nationwide 5G mobile network by 2020. How does T-Mobile plan to do it? By utilizing that low-end 600 MHz spectrum it bought last year. According to Legere, this differs from Verizon and AT&T, which are looking to roll out fixed 5G wireless using high-band millimeter-wave spectrum in select markets, aiming to more directly compete with cable.
AT&T struck back two days later, saying that it would roll out mobile 5G networks this year, but only in 12 select markets. The international standards body 3GPP just finalized 5G standards last month, so the race to 5G -- both mobile and fixed–- is on.
600 MHz pluses and minuses
Legere called the purchase of 600 MHz spectrum "one of the most under-reported stories of 2017." Of course, it may be have been under-reported because there was no way for customers to utilize the spectrum at the time. Traditionally, this spectrum was occupied by television broadcasters, but they have cleared it to make way for mobile carriers like T-Mobile. As such, at the time of the spectrum auction, there were no mobile phones with 600 MHz compatible chips.
That changed toward the end of 2017, however, as LG (NASDAQOTH:LGEAF) produced the V3, the first phone on the market that is 600 MHz compatible, courtesy of a new Snapdragon chip made by Qualcomm (NASDAQ:QCOM). That phone is 600 MHz compatible but works on 4G LTE right now. With more 5G-compatible mobile devices now rolling out in the years ahead and the new spectrum now cleared, T-Mobile plans to implement nationwide 5G as soon as it can.
Can 600 MHz hack 5G?
I was confused about 600 MHz and 5G, as I had thought that low-band spectrum can't transmit as much data as higher-band, or "millimeter wave," spectrum. Therefore, perhaps these low-band networks could bring 5G to more rural, less crowded areas, but I am uncertain in they could bring the ultra-high-speeds many have been forecasting to cities. Even Legere has said that 5G will be brought about through a combination of low, mid, and high-band spectrum: "There's no such thing as 5G spectrum. It's just spectrum, and 5G will work on all of it."
Hardware and software
Legere said that T-Mobile is already installing 5G-ready equipment into its network with partner Ericsson (NASDAQ:ERIC), which it can then turn into a 5G-capable network with a software update, or "flip of a switch," according to an August press release. So, perhaps this new equipment and software will be able to boost low-band spectrum to handle true 5G speeds in more-urban areas. Still, T-Mobile is apparently prioritizing nationwide mobile coverage first, rather than wowing people with super-high speeds only in limited areas.
We'll have to see if T-Mobile's strategy works and if Legere's bluster can be backed up in the years ahead. One thing is for sure: The race to 5G will be costly and intense. In the absence of a clear advantage, the main beneficiaries of 5G may be the customers and businesses that use this next-gen network, rather than the carriers themselves.
Billy Duberstein owns shares of AT&T and T-Mobile US. The Motley Fool owns shares of and recommends Verizon Communications. The Motley Fool owns shares of Qualcomm. The Motley Fool recommends T-Mobile US. The Motley Fool has a disclosure policy.