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FAQ: The 700-MHz wireless auction results

By David Haskin
March 26, 2008 12:00 PM ET

Computerworld - We know who won the just-completed Federal Communications Commission auction of wireless spectrum. But we don't know what the winners will do with the spectrum, what the prospects are for the losers and, perhaps most important, how the auction will effect users.

Verizon Communications Inc. won much of the coveted "C block" of wireless spectrum in the 700-MHz band, and AT&T Inc. won big chunks of the "B block." (For a fuller explanation of the auction, the blocks and what was at stake, check out this article.) Both Verizon and AT&T now have enough 700-MHz spectrum to create new nationwide wireless networks.

However, there were less-publicized winners and also some losers in the auction. And how did users fare? Here are some frequently asked questions about the impact of the spectrum auction.

What will Verizon and AT&T do with their new spectrum?

Verizon, the second-largest cellular operator in the U.S., paid about $9.63 billion and gained as much 700-MHz spectrum as it needs to create a new nationwide network. AT&T, the nation's largest operator, had previously acquired a large chunk of 700-MHz spectrum, and it spent an additional $6.64 billion in this most recent auction for even more so that it, too, can create a new nationwide network.

The FCC forbids auction winners from talking about their plans until April 3, but the presumption is that these carriers will build completely new wireless networks because neither currently uses the 700-MHz band for its existing network. In particular, pundits presume, this newly acquired spectrum will enable the carriers to build next-generation networks based on a technology called Long-Term Evolution (LTE). Verizon has announced that it will use LTE, and it is a logical migration path for AT&T as well.

The creation of new networks is exceptionally expensive, so why are the carriers building new networks to replace their old ones?

"It's a greenfield thing," said Jack Gold, an analyst at J. Gold Associates, a telecommunications consulting firm. "Verizon and AT&T can leave their existing networks in place and not harass their customers when they build their new networks." By that, Gold meant that outages or other hassles could occur while a network was undergoing a major upgrade, problems that wouldn't occur during the build out of a "greenfield" network.

Gold cautioned against expecting the new networks anytime soon. LTE technology isn't expected to be ready for users until 2011.

He noted that, in theory, AT&T and Verizon could build WiMax networks sooner than LTE networks. That technology is ready now, and Sprint Nextel Corp. has said it will roll out its WiMax network this year. But Gold noted that, in the near term, AT&T and Verizon are much more interested in spending their money to continue developing their higher-speed networks into the home, such as Verizon's FiOS network.

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