Sprint says it won’t bid on 'beachfront property' spectrum next spring

Sprint announced that it will sit out a major spectrum auction to be held in March. Instead of shelling out billions for new spectrum licenses, Sprint will pour money into upgrading its existing network.

Andrew Kelly/Reuters/File
Sprint announced that it won't participate in the upcoming spectrum auction, where wireless companies will bid on vacated TV spectrum. Here, people walk past a Sprint store in New York on December 17, 2012.

The airwaves are a crowded place. In spite of careful refereeing by national and international regulators, TV broadcasts rub elbows with 4G LTE signals, while GPS transmissions bump into other satellite signals. Radio spectrum is often referred to as a “scarce resource,” because there are only so many usable frequencies, and everyone has to work together to make sure that signals don’t interfere with one another.

Couple that scarcity with the exploding consumer demand for wireless 4G data, and you get the “spectrum crunch”: the point at which there simply isn’t enough wireless spectrum available to carry all the YouTube videos and web pages that people want to watch on their phones. And it’s for that reason that wireless companies such as Verizon and AT&T are willing to pay big bucks for licenses to use additional spectrum bands. The more spectrum they hold, the longer they can stave off the spectrum crunch. The most recent auction conducted by the Federal Communications Commission (FCC), which concluded in January, brought in a total of almost $45 billion from wireless companies looking to get their hands on more spectrum.

In spite of this crunch, Sprint announced on Saturday that it’s done bidding on new spectrum licenses for now. “Sprint has concluded that its rich spectrum holdings are sufficient to provide its current and future customers great network coverage,” the company said in a statement. In other words: Sprint doesn’t need to spend billions to acquire more spectrum licenses; it just needs to do a better job of utilizing the spectrum it already has.

The auction that Sprint is opting out of will take place next March, when the FCC will make auction in the 600 MHz range available for purchase. This “beachfront property” spectrum is especially valuable to wireless carriers because it penetrates buildings more easily and travels over large distances better than higher-frequency spectrum. AT&T, Verizon, T-Mobile, and other companies are expected to bid huge amounts in this auction, especially since it’s the last time for the foreseeable future when a big block of wireless spectrum will be made available for mobile wireless.

Depending on how you measure it, Sprint may already hold more spectrum than anyone else in the industry – but it’s mostly high-frequency spectrum, meaning that Sprint has to build more cell towers to get the same level of coverage as AT&T and Verizon. According to The Wall Street Journal, Sprint is planning to do a major network upgrade this year to get faster 4G LTE data speeds using the spectrum it already has.

Where’s all the auction spectrum coming from? Hopefully from television broadcasters. Under the auction rules, TV broadcasters will agree to part with their spectrum if they’re paid enough. The FCC acts as a sort of middleman between the broadcasters and the wireless companies, noting how much money the broadcasters will sell their spectrum for and then encouraging the wireless companies to bid up to and above that amount. Sprint’s non-participation means a major player won’t be contributing to the auction – but then again, Sprint didn’t participate in either of the last two major auctions, either. The company is making a gamble: save billions now by sitting out the auction, but risk running out of spectrum resources down the road.

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