What value should the government place on the spectrum at 2.5 GHz owned by Sprint Corp. and the company its plans to acquire soon, Nextel Communications Inc.? How should the Federal Communications Commission regulate spectrum for a service that doesn’t exist-yet?
Some consumer groups and others want the government to force the combined Sprint Nextel to divest some 2.5 GHz assets, saying the carrier would own too much spectrum. But as neither carrier currently offers commercial services on the band, it would be difficult for government to argue that merely holding the spectrum violates antitrust policy.
Nextel and Sprint must have come to the same conclusion, because each carrier recently announced separate tests in the band. Nextel announced plans to test wireless interactive multimedia service at 2.5 GHz using IPWireless Inc.’s UMTS TD-CDMA technology. A few days later, Sprint said it would test Flarion Technologies Inc.’s product at 2.5 GHz. Nextel already has conducted its own test with Flarion, and although it is not offering the service commercially any more, the company said it was pleased with test results.
The potential to offer high-speed broadband Internet access is huge, especially for services like video streaming, online gaming and video conferencing. But at this point, the scale weighs down on the side of potential, not reality. Case in point: Project Angel from AT&T Wireless Services Inc. aimed to offer wireless broadband to the home at a low price. The technology worked, but the company could never get the price points low enough to make it competitive. Today, Project Angel is a memory, not a service. General Magic was at the forefront of smart devices. But General Magic is not the household name associated with today’s smart phones. The chances for Sprint (and Nextel) to offer lucrative services at 2.5 GHz are much more promising, but not a guaranteed slam-dunk. Indeed, the two companies told the FCC: “There is no way to predict today precisely which types of services ultimately will be commercially successful in the 2.5 GHz band; thus, it would be premature and contrary to precedent for the commission to undertake an antitrust analysis of these services.”
In contrast, the Justice Department has a case in making Alltel Corp. divest some properties before it approves Alltel’s purchase of Western Wireless Corp. Alltel and Western are the two major cellular operators in Kansas and Nebraska, and there isn’t much other competition.
The 2.5 GHz band surely will be a strong asset for a combined Sprint Nextel. But the companies are smart to merge before they cash in on services in the band.
