Mid-band spectrum delays for Verizon, AT&T only significant if extended

While the current one-month delay in Verizon Communications Inc.’s and AT&T Inc.’s deployment schedules for a key band of wireless spectrum seems minor to analysts, the potential for a longer, more detrimental delay looms.

Both wireless operators recently agreed to delay their rollout of spectrum in the 3.7 GHz-3.98 GHz band, a portion of the C-band. The mid-band spectrum is important for 5G networks because high-band spectrum cannot travel long distances or penetrate certain surfaces and low-band spectrum has become crowded due to 4G wireless services.

The move came after the Federal Aviation Administration released a bulletin detailing concerns it has with C-band wireless equipment and the potential this equipment has to interfere with flight equipment. The FAA made recommendations for radio altimeter manufacturers, aircraft manufacturers, and operators and pilots.

Analysts say that while a one-month delay may not cause material impact, longer delays could. New Street analyst Blair Levin wrote in a note that a longer delay could put Verizon and AT&T at a greater disadvantage to T-Mobile US Inc. in attracting customers to adopt their 5G services.

“Further delays could cause consumer patterns to shift for years to come,” he said.

C-band spending
Levin said Verizon would be most impacted by longer a delay, and AT&T would be the next most affected due to the prices they both paid for C-band spectrum in the February 2021 auction.

Verizon shelled out $45.45 billion to win 3,511 licenses in the auction, almost 2.5x the company’s capital expenditures in 2020, according to S&P Global Market Intelligence. The company recorded capex of $18.19 billion on its cash flow statement. AT&T was the second-biggest spender, paying $23.41 billion for 1,621 licenses. T-Mobile, which has a stockpile of 2.5 GHz spectrum from its purchase of Sprint, spent $9.34 billion in the C-band auction for 142 licenses.

Levin thinks there are solutions that could help the FAA and wireless companies find a middle ground, including a phased C-band rollout and congressional intervention.

“Despite the problematic incentives for the FAA in this situation, there is the big point that the FAA opposition runs against the compelling real-world experience in other countries that there is no risk,” Levin wrote.

Working on solutions
The FAA said it is currently collaborating with the Federal Communications Commission and the National Telecommunications and Information Administration to assess the need for mitigation beyond the recommended actions in the bulletin.

Both Verizon and AT&T expressed commitments to safety and compliance with science-based investigations.

“It is critical that these discussions be informed by the science and the data. That is the only path to enabling experts and engineers to assess whether any legitimate coexistence issues exist,” AT&T Director of Media Relations Margaret Boles said in a statement.

Verizon did not respond to a request for comment, but told The Washington Post that it looked forward to “a data-driven analysis that will again demonstrate that 5G operations in this band pose no risk to flight safety.”

Other spectrum options
During DISH Network Corp.’s third-quarter earnings call, DISH Chairman Charlie Ergen said DISH would consider leasing spectrum to interested companies if delays last longer than expected.

“There are a number of parties that have asked about the ability to lease capacity,” Ergen said. “Any delay in C-band, particularly for Verizon, probably, where they really spent a lot of money on it, would be positive for T-Mobile probably, but not positive for the other guys.”

For companies looking for other mid-band spectrum options, there is also the current Auction 110 taking place, where the FCC is offering up 100 MHz of contiguous spectrum in the 3.45 GHz band.

BitPath Chief Operating Officer Sasha Javid said Verizon and AT&T’s one-month delay will probably have little impact on the ongoing Auction 110, which has reached $21.8 billion in gross proceeds as of the afternoon of Nov. 8.

“If it ends up being just a one-month delay, then probably not. Either way, because of the way the clock auction is rightfully structured, we won’t see any substantial changes to bidding in this auction,” Javid said in a note.

Verizon is believed to have dropped out of bidding in that auction in October, largely due to the tens of billions of dollars it had spent on C-band spectrum. CT Bureau