Under the Microscope: AT&T’s Nextwave Acquisition

MicroscopeIn the most recent deal, AT&T filed to acquire Nextwave’s WCS (Wireless Communication Services) and AWS (Advanced Wireless Services) assets for $650 million. The bulk of this deal is about the WCS band, so what is this deal about and what does AT&T get for the money?

The 2.3 GHz WCS band has long been hampered by stringent requirements on spectral mask and out-of-band emissions that are necessary to protect the satellite DARS band which divides the 30 MHz wide WCS band into two parts, each of 15 MHz. Satellite radio operator Siruis XM uses the DARS band for its services. Recently, AT&T and Sirius XM agreed and petitioned the FCC that if parts of the WCS C and D blocks, each of which is 5 MHz wide, that are adjacent to the DARS band are used for ‘guard band,’ then the regulatory requirements on spectral mask and out-of-band emissions can be relaxed. The A and B blocks then can be used in combination to provide broadband services over 20 MHz of channel bandwidth. The relaxed regulatory requirements would enable vendors to design mobile phones and portable devices in this band which would not have been possible under the old rules.

2.3 GHz WCS Band

2.3 GHz WCS Band

The WCS band ownership is divided between the different operators shown in the table below. While AT&T is a majority owner of the WCS spectrum with 43% of total MHz-PoP, it cannot operate broadband services because the band ownership is fragmented between different licensees. AT&T owns 40% of the A & B blocks and 49% of the C & D blocks. Nextwave on the other hand is the second largest owner of WCS band spectrum with 29% of total MHz-PoP. It owns 24% of the A & B blocks and 42% of the C & D blocks. The acquisition opens up more markets for AT&T to deploy broadband in the A&B block, but most importantly, it provides AT&T with the guard band it needs to roll out such services.

 % of MHz-PoP

A

B

C

D

% of Total MHz-PoP

AT&T

30%

49%

49%

49%

43%

Nextwave

32%

15%

34%

51%

29%

Comcast

2%

21%

18%

0%

11%

Horizon

23%

0%

0%

0%

8%

Sprint

9%

12%

0%

0%

7%

Windstream

3%

3%

0%

0%

2%

Ntelos

1%

0%

0%

0%

0%

Total

100%

100%

100%

100%

100%

For the plan to fully take hold, AT&& will have to acquire Comcast’s and Horizon Wi-Com’s spectrum assets as well. The majority of Comcast’s assets are in the B block with some C block holdings. Horizon’s assets are exclusively ‘A block,’ of which many are in prime markets. Finally, there is Sprint that has 11% of the combined A & B blocks in its possession.

Freeing up the WCS band was one of the major recommendations of the FCC in their National Broadband Plan of 2010 (Recommendation 5.8.1). The agreement of AT&T and Sirius XM followed by the acquisition of Nextwave’s spectrum followed by Comcast’s and Horizon’s will realize this recommendation.

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About Frank Rayal
Telecom industry management consultant.

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