T-Mobile bought almost 200 spectrum licenses in the 3.45GHz range at the beginning of this year, but it doesn't plan to put those licenses into use until the end of 2023.

The company spent almost $1 billion across several FCC millimeter wave spectrum auctions more than two years ago but still has no concrete plans to put that spectrum into widespread action.

Yet T-Mobile's networking chief made this claim just a few months ago: "We have never warehoused spectrum in my entire career at the company. We never will," Neville Ray said at a November investor event.

Is Ray being facetious? Or is something else going on?

The truth about spectrum

The reality is that spectrum is a tool. It's a tool that can be used to provide wireless services or to create value as an investment.

T-Mobile is using most of its spectrum holdings for wireless services. The company's network is widely regarded as the biggest and fastest 5G network in the US – mainly because of all the spectrum T-Mobile has put into the network.

Figure 1: (Source: T-Mobile)

But T-Mobile's current 5G plan has no place for its millimeter wave (mmWave) spectrum holdings. Ray suggested the operator might use mmWave for fixed wireless at some point in the future. And that would be the point at which T-Mobile's mmWave spectrum tool would shift from an investment to a network asset.

This is all perfectly legal. In general, the FCC does require spectrum owners to build a network with their licenses. Typically they must do so within 10 years of getting spectrum licenses. But during that 10-year ownership period, spectrum winners can do whatever they want, including nothing.

Spectrum as an investment

Although most companies that participate in FCC spectrum auctions intend to build a network with spectrum licenses as quickly as possible, some don't.

For example, Columbia Capital acquired a substantial amount of 600MHz spectrum licenses during and after the FCC's 2017 auction. A few years later, T-Mobile bought those licenses for $3.5 billion – roughly double what Columbia spent to acquire the licenses. That's a pretty good return on Columbia's spectrum investment.

NextWave is the premier example of a company that bet heavily on spectrum as an investment. NextWave walked away with $4.2 billion in licenses in the FCC's PCS spectrum auction in the 1990s, but it quickly fell into bankruptcy. After a protracted legal battle with the FCC, the company eventually sold much of its spectrum holdings to Verizon, AT&T, T-Mobile and others.

But NextWave is also playing on the network operator side of the equation. The company in September launched a private wireless network running in its 2.5GHz spectrum holdings across New York City. Whether that's to meet FCC buildout goals or to provide commercial services remains to be seen.

Warehousing versus investing

The wireless industry traditionally laments the practice of "warehousing" spectrum. Spectrum should be used to provide services to customers – so the argument goes – and not squirreled away as a financial investment.

Indeed, that's the exact argument T-Mobile deployed against Dish Network in 2018, before the start of Dish's big 5G network buildout. Dish "intends to continue to warehouse spectrum with no benefit to consumers," T-Mobile argued at the time. The FCC "should not permit Dish to succeed with its plan."

But just a few months later, Dish, T-Mobile, and the US Department of Justice reached an agreement that paved the way for T-Mobile to acquire Sprint and for Dish to begin building its 5G network. That's when Dish began transitioning its spectrum tool from an investment and into a network. By the middle of next year, that network ought to span tens of thousands of cell towers around the country.

So is Dish a spectrum hoarder? Or is it leveraging a wise spectrum investment into a 5G network that could ultimately upend the US wireless industry? Only time will tell.

The politics of spectrum

A big reason why spectrum "warehousing" is such a dirty word in the wireless industry is because of its political implications. Big wireless network operators want US lawmakers and regulators to release more spectrum for 5G, and part of their argument hinges on claims that they will be good stewards of that spectrum. They argue that 5G benefits society, and therefore they should get more spectrum to provide speedy 5G services. That's at the heart of the current battle over whether the FCC should auction spectrum between 3.1GHz and 3.45GHz.

But fears over "warehousing" are also why the FCC applies network-buildout deadlines to spectrum licenses. If the companies that own spectrum licenses don't put them to use in 10 years – or whatever the agency's timeline is for a specific band of spectrum – they risk losing them altogether.

Aside from these basic deadline-driven network-buildout rules, there's no good reason to prevent market forces from optimizing spectrum use. If Columbia Capital finds it more valuable to sell its spectrum than to build a network with it, what does it matter as long as the buyer adheres to the FCC's buildout deadline?

The same goes for T-Mobile. Who cares if the operator isn't actively building out its 3.45GHz and millimeter wave spectrum licenses right now? It will probably do so at some point in the future, likely well within the FCC's buildout deadlines. And if it doesn't, it will be forced to sell the licenses or give them back to the FCC. Either way, the desire for profits from spectrum – capitalism – will ultimately drive T-Mobile's decisions. And that's a pretty efficient spectrum management mechanism, whether in a warehouse or not.

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— Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano