700 MHz: Meet the new operators -- same as the old operators

Big, familiar faces dominated the auction

If there were any surprises in the 700 MHz auction, it was that there were no surprises. This was the auction where everyone expected the telecom industry to see a shake-up — new faces with new business plans.

There were a few new names. Cox Communications bought up some spectral property in the Southwest and Southeast, signaling its possible entrance into wireless broadband, but only in a few markets where it provides cable service. EchoStar's DISH Network won a huge swath of E?Block licenses, but due to the nature of the band, it's more likely they'll be used to augment the company's current broadcast services rather than be put to broadband use.

But the big winners of the auction were very familiar: AT&T and Verizon Wireless.

“I was hoping we'd see more of a greater distribution of the licenses among the auction winners,” said John Celentano, president of Skyline Marketing Group. “Such a concentration of spectrum among the biggest operators is disappointing. That said, this assures that investments will be made in building networks for the new licenses.”

Verizon stole the show, winning the majority of the 22 MHz C Block, covering the lower 48 states, and it picked up numerous smaller regional and big city properties to boot. AT&T was more targeted, focusing exclusively on B Block licenses in metropolitan areas. AT&T paid dearly for that pinpointing strategy though, as the B Block carried high price tags, particularly in the largest markets.

Stifel Nicolaus found that AT&T spent $3.15 per person per hertz of spectrum, while Verizon spent $1.10 per person per hertz. AT&T paid only $2.72 billion less than Verizon, but it received substantially less in terms of overall people covered and megahertz of spectrum. AT&T did get its money's worth in terms of the markets covered: Atlanta, Boston, New York, Philadelphia and San Francisco, to name a few. The new networks on 700 MHz will start out in the urban cores where demand and densities are highest. Of, course, Verizon landed those markets, as well as many more, by virtue of its nationwide C Block rout.

Both AT&T and Verizon have committed to building long-term evolution networks, and they'll most likely be built at 700 MHz. That puts a big question mark on WiMAX's viability in that spectrum. There is now no opportunity for a big operator to build a nationwide WiMAX footprint at 700?MHz as Sprint is doing at 2.5 GHz — many thought Google would fill that role.

That doesn't necessarily spell disaster for WiMAX in the band, said Ron Resnick, president and chairman of the WiMAX Forum. While there will be no equivalent to Sprint to drive economies of scale at 700 MHz in the U.S., there will be in numerous other countries, Resnick said. The band is opening up to 4G technologies in China, Europe and India, all of which could share the same WiMAX equipment along with smaller U.S. operators.