By Alexia Sparling, an insider at Lease Advisors
The important role of spectrum in the telecommunications arena is not always clearly understood. Spectrum refers to the frequency bandwidth that connects cell towers with wireless devices. Spectrum is limited; therefore the Federal Communications Commission (FCC) regulates its allocation on behalf of the federal government. In recent news, the FCC hosted the AWS-3 spectrum auction known as Auction 97. This past December, Auction 97 reportedly generated over $44 billion. Clearly wireless carriers have allocated a vast amount of capital in the efforts to acquire spectrum, but why? Frequencies, which define spectrum, affect the quality of the wireless signals. These frequencies are measured in gigahertz (GHz). High-frequency spectrum allow for wireless signals to travel shorter distances, whereas low-frequency spectrum allows wireless signals to travel long distances. High-frequency spectrum is ideal for carrying vast amounts of data. Low-frequency spectrum, on the other hand, requires fewer cell towers, so their network is cheaper to establish. Spectrum has been divided into two categories: coverage spectrum and capacity spectrum. Coverage spectrum is low-frequency spectrum below 1 GHz. Capacity spectrum is high-frequency spectrum above 1 GHz. All in all, the more spectrum a company possesses, the stronger their wireless signal is and the better their coverage network.
Particularly in the United States, spectrum can be divided into three bands: low, medium, and high frequency. Illustrated in the graph below, Sprint has the largest spectrum holding and the largest holding of high-frequency spectrum. AT&T holds the largest low-frequency spectrum. T-Mobile has the most limited range of spectrum, with the least amount of low-frequency spectrum and possesses no high-frequency spectrum. Now that Auction 97 is over, we should expect to see a somewhat dramatic shift in US telecom holdings. What remains to be seen is what this means for wireless providers and their customers.
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