Sprint Poised for 'Huge Win' as FCC Frees Up 2.5GHz Spectrum

Sprint and -- by possible extension, T-Mobile -- could score a significant victory as the FCC prepares to carve out and open up a slice of valuable mid-band spectrum in the 2.5GHz band, a top industry analyst said.

"If approved, this would be a huge win for Sprint and its possible acquirer, T-Mobile," BTIG Analyst Walter Piecyk wrote Friday in a blog post. "Sprint will be able to more easily consolidate a whopping 194MHz of contiguous mid-band spectrum and it would expand the geographic reach of Sprint’s spectrum, facilitating easier network deployment."

Piecyk also doesn't believe Sprint, which already has a strong incumbent position in that band (thanks to the 2013 Clearwire acquisition), will have to compete tooth and nail with the likes of AT&T and Verizon to grab that valuable real estate. "It's hard to see why any national operator would compete with Sprint to bid for this spectrum," he wrote.

Piecyk's commentary comes on the heels of Tuesday's announcement by FCC Chairman Ajit Pai that the Commission would open up and look to auction an unused portion of that band for 5G use. The FCC is set to vote on the proposed order on July 10.

Piecyk noted that mid-band spectrum has become an increasingly important component for 5G as millimeter wave spectrum continues to be saddled with performance and coverage issues in the early going.

The analyst also explains that the Educational Broadband Service (EBS) portion of the 2.5GHz band being targeted by the FCC order is "quite messy" (it's not licensed on a traditional geographic basis like most other spectrum used by wireless operators today). He notes that the plan is to convert the lower EBS blocks (shown in red in the chart below) and the J-Block (in white) into one 100MHz spectrum block, and expanded to 106MHz by tacking on the BRS (Broadband Radio Service) spectrum block (shown in green), plus an upper 88MHz spectrum block.

(Source: BTIG)
(Source: BTIG)

That would make for 194MHz of contagious spectrum, if combined, "which is likely given Sprint's ownership in both bands," Piecyk explained. "This proposed FCC auction will enable Sprint to convert a licensing scheme that involves a bunch of overlapping coverage circles to one that is done on a county by county basis."

But he also warned that the auction rules don't enable winning bidders to force incumbent EBS users off the spectrum, a situation that could, again, favor Sprint, which has been sub-leasing some of that capacity from educational institutions.

"For example, if Verizon was an auction winner, an incumbent licensee in that county could still sell their license to Sprint or AT&T or whomever," Piecyk wrote. "So why would AT&T or Verizon bid for spectrum that effectively only gives them access to low-population areas that surround Sprint?"

He suspects that Sprint has long-term leases with rights of first refusal on any sale, giving the company "a material advantage" in the bidding process.

But, he adds, Sprint could come up against some "hold-out licensees" in the 2.5GHz band in markets such as New York City that might try to aggregate the full block. If that's the case, Sprint could be required to pay a premium to buy them out, Piecyk said, estimating that it could cost Sprint $1 billion to $2.5 billion to pull that off.

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— Jeff Baumgartner, Senior Editor, Light Reading

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