by Andrew J. Shepherd
Sprint 4G Rollout Updates
Thursday, November 8, 2012 - 1:10 PM MST
Update: Six weeks later, Sprint and U.S. Cellular have finally filed their PCS 1900 MHz license assignment applications in the FCC ULS database. From the filing, we have learned that USCC will not relinquish all of its PCS spectrum in Springfield and Champaign, so the primary market spectrum table below has been updated to reflect that clarification. In a nutshell, Sprint will acquire a consistent PCS B block 20 MHz partition and disaggregation in all affected counties in the Chicago MTA and a consistent PCS A block 10 MHz partition and disaggregation in all affected counties in the St. Louis MTA. For a complete list of the counties included in the spectrum transaction, see this spreadsheet from the FCC filing.
Yesterday, Sprint and U.S. Cellular announced an agreement to transfer PCS 1900 MHz spectrum and subscribers in several midwestern markets -- notably, Chicago, St. Louis, Ft. Wayne, South Bend, Springfield (IL), and Champaign -- from USCC to Sprint. While this transaction does entail that USCC will exit its largest and home market, Chicago, it is not a merger. Overall, USCC will give up 585,000 subs but will retain over 5 million current subs, and the deal involves no transfer of wireless infrastructure. Rather, the existing USCC CDMA2000 infrastructure in the affected markets will be retired within approximately two years, as subs are transitioned to the Sprint network. The exact boundaries of the PCS licenses and subs to be transferred from USCC to Sprint have not yet been revealed on a county by county basis. So, this article will be updated once the FCC assignment applications are filed or any other further info arises.
In the meantime, know that this is a spectrum transaction, bar none. Chicago is Sprint's largest market in which it holds only 20 MHz of PCS A-F block spectrum. In nearly all other top 10 markets, Sprint holds 30 MHz of PCS A-F block spectrum. And Ft. Wayne is a proverbial red headed stepchild market -- Sprint's only top 100 market with only 10 MHz of PCS A-F block spectrum. So, most importantly, this transaction provides a 20 MHz PCS injection into Sprint's spectrum holdings in both Chicago and Ft. Wayne. For a look at the five largest markets included in the deal, see the spectrum table below:
Moreover, Sprint's existing PCS D block 10 MHz and PCS E block 10 MHz licenses in Chicago are non adjacent. As such, Sprint has to run an extra set of guard bands -- one set of guard bands for each license. Those extra guard bands take up valuable spectrum, limiting Sprint to only six instead of seven CDMA2000 carriers in its 20 MHz of spectrum and leaving more sites in Chicago spectrum constrained than in any other big market. Synergistically, though, the PCS B block 20 MHz license that Sprint will acquire in Chicago is directly adjacent to its existing PCS D block 10 MHz license, giving Sprint a fully 30 MHz contiguous swath of PCS spectrum, which will allow Sprint to deploy additional CDMA2000 carriers and larger LTE bandwidth (10-15 MHz FDD) when the time comes to add LTE capacity. See the license contiguity in the band plan diagram below:
Speaking of LTE, that is one of the key reasons why USCC is willing to part with its Chicago market. In most of its markets, USCC holds some combination of Cellular 850 MHz, PCS 1900 MHz, AWS 2100+1700 MHz, and Lower 700 MHz spectrum. But in Chicago, USCC controls only the aforementioned 20 MHz block of PCS spectrum. USCC entered the Chicago market just 10 years ago when it acquired PrimeCo, which had been divested as part of the merger that created Verizon Wireless. Since then, USCC has been unable to acquire additional spectrum in Chicago, leaving it effectively incapable of deploying LTE in its largest market while continuing its CDMA2000 operations. So, the deal with Sprint provides an exit strategy for Chicago in what was otherwise a dead end market for USCC.
In the other five of the six markets detailed above, USCC likely could roll out LTE, as it holds additional AWS 2100+1700 MHz and/or Lower 700 MHz licenses in those markets. It should be noted, however, that those non PCS licenses are not being transferred to Sprint in this deal. But as it exits those markets, USCC will almost surely look to sell the other licenses, too, with VZW and T-Mobile being likely buyers for the AWS spectrum, AT&T a strong possibility for some of the 700 MHz spectrum.
Sources: FCC, USCC, Sprint