Industry Analysts Ponder Carrier Strategies
By Joseph Palenchar -- TWICE, 8/21/2000
Most wireless carriers aren't revealing their 1.9GHz auction strategies for fear of bidding up license prices. In fact, many carriers simply won't confirm that they're interested in the bidding at all.
Wireless-industry analysts, however, believe all of the major carriers will be involved in the bidding, and they believe they know why.
Here's what select analysts believe key carriers hope to accomplish in the November auctions. (See related story for more information on how next year's 700MHz auctions fit into carriers' plans to offer 3G wireless-phone services.)
Alltel: The CDMA carrier, which operates primarily in smaller markets in 19 states, hasn't indicated a desire to create a national footprint, said Yankee Group analyst Eugene Signorini. Nonetheless, the carrier might want to acquire spectrum to build out its core footprint or capture more roaming revenues from the likes of CDMA carrier Verizon.
AT&T: By the end of the year, the near-nationwide carrier will have a presence in 90 of the top 100 markets even without buying new spectrum. As a result, it would probably look to the auctions to expand capacity within its existing markets to improve service, said Gartner Group/Dataquest analyst Tole Hart. The carrier might also add some markets.
An industry executive familiar with AT&T's network claimed another AT&T priority would likely be to extend the wireless footprints of its existing markets so it can eliminate roaming fees for some customers. As it has done in some markets, AT&T could expand its markets' footprints by building roaming-only sites for use only by AT&T subscribers.
If the price is right, the marketer said, AT&T might also enter secondary markets, in part to make its one-rate plan more profitable.
Although AT&T declined to comment on its strategy, a marketer also contended that if AT&T gathers enough spectrum in the 1.9GHz auctions, it might reserve some of it for future 3G services based on W-CDMA technology, which would require the carrier to dedicate 5MHz of spectrum in each market for the service.
Leap Wireless: The company's Cricket-brand flat-rate, unlimited-use, local-only service is operating in two markets and will be expanded to eight more by the end of the year. It's also building networks in 25 other markets. The company could look to the auctions to add markets beyond those, analysts said.
Nextel: With partner carriers, the Enhanced-SMR carrier already offers service in markets where 190 million people live, said analyst Hart, but the carrier is nonetheless spectrum-challenged. Nextel will likely use the auctions to build capacity within its existing markets, some of which have as little as 5MHz of spectrum. Other markets have as much as 15MHz.
After expanding capacity, the carrier might be in a position to diversify its business-oriented rate-plan portfolio to include consumer-oriented plans that could significantly expand its subscriber base, he said. Nextel might even look to the 700MHz auctions to expand capacity in existing markets, potentially creating demand for dual-band 700MHz/ 900MHz phones.
SBC Wireless/BellSouth Wireless: The planned year-end merger of these two carriers will, according to an SBC spokeswoman, yield a carrier with the nation's second largest subscriber base. But analyst Hart noted that the merger won't create a national player with operations in the top 90 or 100 markets. The two carriers have operations in more than 30 states but have significant coverage gaps in the Midwest and Northwest, he pointed out.
Said Strategis senior VP Elliot Hamilton, "They need spectrum to get to the top 100." Signorini called the carrier "likely to [try to] fill gaps or all their gaps" to create a national footprint.
A national footprint will help the carrier drive down the internal cost of implementing a new nationwide one-rate plan, Signorini added. The plan's price to consumers, however, might not change significantly because the rates are "fairly competitive."
An SBC spokeswoman also said SBC is "definitely interested in additional 1.9GHz spectrum to increase capacity."
Dallas-based SBC Wireless operates 800MHz TDMA and 1.9GHz GSM networks in 25 states under six brand names: Ameritech Cellular, Cellular One, Nevada Bell Wireless, Pacific Bell Wireless, SNET Wireless and Southwestern Bell Wireless. It's in 32 of the top 50 markets.
Sprint PCS: The nationwide PCS carrier has the least need for spectrum in existing or new markets -- at least for wireless phone service, analysts said. Nonetheless, the carrier wants more spectrum and will participate in the auctions. "It will enable us to implement other services," including wireless broadband service to homes and businesses, a Sprint spokesman said.
One reason the carrier doesn't need more spectrum in its existing markets, the spokesman said, is that it uses less than 10MHz of the spectrum that it owns in those markets. In most markets, Sprint owns 30MHz of 1.9GHz spectrum.
The carrier is using a small segment of its spectrum because of the CDMA technology's spectrum efficiency, the spokesman said, but analysts also attributed it to two other factors. One is the relative newness of the Sprint network. Another, in contrast to 800MHz cellular carriers, is the lack of analog subscribers whose analog phones aren't so spectrum-efficient.
Sprint also contends it doesn't need spectrum to fill coverage gaps, and one analyst agreed. In concert with partners that operate under the Sprint name, Sprint has "few coverage gaps," Gartner's Hart said. And from those partners, it "gets good roaming rates."
Even without auctions, by the end of 2000 or mid-2001, Sprint and its partners will be operating in markets where 7/8 of the U.S. population lives, Hart said.
Sprint also claimed it doesn't necessarily need additional 1.9GHz spectrum to implement 3G technology such as CDMA2000. "We believe we have enough for full 3G," the spokesman said.
Verizon Wireless: The CDMA carrier has more than 24 million subscribers in 96 of the top 100 U.S. markets where 90 percent if the U.S. population lives. Despite its extensive network, however, Gartner's Hart believes Verizon might be interested in new markets, particularly to fill a gap running from Georgia to Nebraska.
Strategis' Hamilton believes the carrier could also use another 10MHz for added capacity in existing markets.
Although Verizon plans to implement voice- and data-capacity-expanding 1XRTT technology in its existing spectrum, "we have never said if we have enough spectrum for [full] 3G services, and we don't know if we will do [full] 3G," a spokeswoman said.
Voicestream: Even though the 1.9GHz carrier recently bought out the Aerial and Omnipoint networks, "it needs new markets because it's not yet in the top 100 markets," said Strategis' Hamilton. "It could purchase Powertel to fill a hole in the Southwest, but I expect it will still look at the auctions."
No related content found.
VIEW ALL GALLERIES