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Airports don’t present a risk to cell companies

AT&T and Verizon have recently seen a threat to their 5G rollout. The threat has been caused by reports of potential 5G interference to airlines. As we’ll see throughout this article, while the expectation is that the issue will be easily resolved, short-term issues could place an impact on both companies.

The issue
All waves move at the speed of light. As a result, their wavelength is attributed to their frequency. A hertz means a cycle per second so a megahertz means a million cycles per second. Ergo, a 1 MHz frequency, based on the speed of light, has a wavelength of almost 300 meters. That matters for the purposes of waves interfering with each other.

Two wavelengths that have very different frequencies won’t interfere because the difference in wavelengths means perfectly constructive or deconstructive interference is impossible. The closest you can get is with another frequency a certain multiple of a previous frequency can have interference with the LCM of waves.

Now the issue is that the C-band 5G spectrum, about to be launched, has a frequency close to that of radio altimeters, the instrument that planes use to tell how far they’re from the ground. A clearly important one. The FAA is arguing that C-band, about to go into service, in the 3.7-3.8 Ghz region is too close to the 4.2-4 Ghz region these radio altimeters operate in.

Why Not T-Mobile?

So why isn’t T-Mobile affected by this?
The C-Band expected to come into the market (Block A) was part of the massive $80 billion auction earlier this year where AT&T and Verizon decided they needed to catchup. Block B/C are expected to come online around 2023, however, since they’re in the 3.8-4.0 MHz range could exacerbate the same problem.

T-Mobile has chosen to focus on spectrum in the 2.5 Ghz range, feeling it provides a better balance of high speed with less buildout. The company invested a minimal $12.2 billion in the last auction primarily in Block B/C. Block A was dominated by Verizon and AT&T and that’s the block being launched with wireless carriers.

As a result, by the time T-Mobile spectrum is out, this problem will likely be solved.

The path forward
The path forward is for the FCC and FAA to work together and solve how radio altimeters can be solved. 200+ Mhz of spectrum won’t be put out of commission forever. The FCC has put the pressure on airlines to resolve it, and internationally it hasn’t been an issue. Airlines have warned that while the onus is on them it could lead to flight delays.

It could take several additional months to rollout, during which time AT&T and Verizon have agreed to delay the rollout of 5G towers near airports. That could lead to a worse customer experience for 5G activities, such as streaming Netflix in the airport, and could potentially hurt them. It’s tough to quantify but the companies didn’t spend billions on spectrum for no reason.

The path forward is for the industries to work together, which could take months, and release a viable solution.

The risk
The risk to the company is minimal. T-Mobile is already leading in 5G. In our view, the largest potential risk is bad press around AT&T and Verizon having more trouble with 5G and being slower. Verizon spent $40+ billion for spectrum where the rollout is being delayed. Still there’s some risk to these companies here.

Our view
Our view is that the problem is interesting and that’s resulted in tons of news articles. However, it’s not a true issue. They’ll completely redesign radio altimeters before they allow 200 Mhz of spectrum worth $10s of billions to not be utilized. Internationally, radio altimeters haven’t been an issue with C-band so we don’t expect that to be true.

There is a theoretical ability for interference, however, even that interference hasn’t been shown to affect flights. Rather an FAA airworthiness directive until more data is released has been what’s put the pressure on various groups with airlines saying that without using radio altimeters in the ways outlined could lead to significant flight cancellations.

In the meantime, AT&T and Verizon could get some bad press but we don’t expect it to be material to investors.

Conclusion
AT&T and Verizon are once again in the news getting punished. Both have agreed, after work with industry groups, to pushback turning on Block A of 5G spectrum, amounting to $10s of billions worth of spectrum. Airline groups are warning that this could potentially lead to a significant amount of delays, which could hurt them.

Going forward, despite this news, we expect the 5G rollout to continue and the wireless carriers to continue along their existing trajectories. As we discussed elsewhere, we see AT&T as an undervalued investment. We see that potential as continuing, even with this recent news that’s been affecting the company and its activities. Seeking Alpha

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