Verizon Stakes Claim to Huge Spectrum Slice

Verizon Wireless is shelling out $3.6 billion for a huge swath of wireless spectrum space that covers about 259 million potential customers.

Dan Mead, President and CEO of Verizon Wireless, said the additional spectrum "will enable us to bring even better 4G LTE products and services to our customers."

In a world where spectrum space is to wireless operators as oil reserves are to energy companies, the deal gives Verizon a huge leg up on its competitors, most notably AT&T, stymied in its attempt to make off with T-Mobile's spectrum.

It not only assures Verizon of continued network dominace but takes a big stack of resources off the table and out of the reach of its competitors.

Verizon is buying the space from SpectrumCo, a consortium made up of major cable companies Comcast and Time Warner as well as Bright House Networks.

Spectrum drought

With consumers increasingly wedded to their smartphones, tablets and laptops, spectrum space is getting to be like water in the desert -- there's just not enough of it to go around and nearly every little bit and byte is already spoken for.

The Federal Communications Commission (FCC) would like to open up more spectrums pace but the only way to do that is to take it away from existing licensees, including broadcasters and other well-organized groups who tend to circle their wagons and aggressively fight off intruders.

There was a time when the cable operators thought they might get into the cell phone business and they bought up as many spectrum licenses as they could.  Today's deal marks the end of that era but it doesn't mean you won't be seeing Comcast and Time Warner competing in the wireless world.

"These agreements, together with our Wi-Fi plans, enable us to execute a comprehensive, long-term wireless strategy and expand our focus on providing mobility to our Xfinity services," said Neil Smit, President of Comcast Cable. 

Resale plans

That's because, in addition to the spectrum sale, the companies have entered into several agreements, providing for the sale of various products and services.  Through these agreements, the cable companies, on the one hand, and Verizon Wireless, on the other, will become agents to sell one another's products and, over time, the cable companies will have the option of selling Verizon Wireless' service on a wholesale basis. 

In other words, Verizon Wireless will be able to sell Comcast and Time Warner cable services in areas where Verizon doesn't offer its FiOS service and, presumably, Comcast and Time Warner will be selling rebranded wireless service from Verizon.  This is an additional blow to AT&T, which currently offers broadband in areas not served by FiOS and, therefore, likely to be targeted by Verizon.

Or as Time Warner Cable President Rob Marcus said, "We're excited to be able to offer the nation's best wireless services to our customers and to have Verizon Wireless as a sales channel for our superb wireline services."

Additionally, the cable companies and Verizon Wireless say they have formed an innovation technology joint venture for the development of technology to better integrate wireline and wireless products and services.

The deal requires regulatory approval from the FCC and other agencies.