Wireless spectrum is a precious commodity for cell phone carriers, and buying more of it is both expensive and necessary.
Meanwhile, T-Mobile (NASDAQ:TMUS)forked over just $1.8 billion to improve its spectrum position. But to counter the competition's deep pockets, T-Moble is looking at a new way to improve its network that doesn't involve buying lots of spectrum.
At the Mobile World Congress this week, the company announced that starting in 2016, it will piggy-back some of its LTE connections onto wireless spectrum typically used for Wi-Fi Internet, referred to as 5 GHz airwaves.
T-Mobile needs to do this for two reasons: Its network quality falls short of AT&T's and Verizon's, and its current network improvement strategies aren't working fast enough.
Cheaper, better, faster
T-Mobile will use the 5 GHz Wi-Fi airwaves to speed up its network connections and add additional capacity at the same time -- all without having to buy new spectrum. The self-proclaimed "uncarrier" will likely participate in another wireless spectrum auction in 2016, but until then, it needs to boost its 4G LTE reliability.
The 5 GHz wireless spectrum is unlicensed, so virtually anyone can use it, and T-Mobile will utilize Alcatel-Lucent's small-cell technology to make the new connections. The result would be data upload and download speeds similar to Wi-Fi, along with better signal stability.
While T-Mobile has made serious improvements to its network over the past few years, the carrier fell to last place for overall network performance in the second half of 2014, according to RootMetrics.
T-Mobile spends about $4 billion to $5 billion per year trying to keep up with its rivals, and it can't keep up that pace for much longer. Timotheus Höttges, CEO of T-Mobile's parent company Deutsche Telekom, told Re/code recently that all of that spending is ultimately unsustainable. So, rolling out the 5 GHz connections could help T-Mobile boost its network performance in some places, without spending for pricey wireless spectrum.
More competition ahead
While T-Mobile will be the first to use LTE connections over the Wi-Fi airwaves next year, Verizon is also looking into it as well. Qualcomm has trumpeted the technology for several years (and T-Mobile's system would incorporate some of the company's technology) and it's likely other carriers will eventually pursue 5 GHz connections as well.
One hurdle T-Mobile will have to overcome is the fact that using LTE connections over Wi-Fi airwaves tends to bump other users off of their Wi-Fi connections, according to Gigaom. This means more than a few logistics will need to be worked out over the next year before T-Mobile can start using the airwaves.
But the end result could mean a much stronger T-Mobile network at a time when the company is desperately trying to improve its place among U.S. carriers -- and spending way too much to get there.
Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends Apple and Verizon Communications. The Motley Fool owns shares of Apple and Qualcomm. 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.
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