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The wireless industry is currently waiting on a verdict from the Federal Communications Commission to decide on Verizon Wireless’s (NYSE:VZ) proposed $3.6 billion partnership with cable companies, including Comcast (NASDAQ:CMCSA). The agreement will impact the entire industry, including related deals for spectrum by AT&T (NYSE:T) and others.
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AT&T Chief Executive Officer Randall Stephenson announced that Washington needs to figure out how to clear a regulatory logjam that is stifling wireless growth and forcing companies to raise prices. The popularity of Apple’s (NASDAQ:AAPL) iPhone, Google’s (NASDAQ:GOOG) Android devices, and other smartphones has put strain on existing networks, which has prompted wireless carriers to seek more capacity in crowded markets. Meanwhile, the FCC is having trouble keeping up with the rate of wireless carriers’ transactions that it must sign off on because of the rapidly evolving industry.
AT&T has said it faces a shortage of spectrum — airwaves that allow mobile devices to make calls and download data. The second-biggest wireless operator in the nation attempted to acquire T-Mobile USA for $39 billion for more spectrum licenses, but the transaction was shut down by regulators in December, after the two companies waited nine months for the decision. AT&T has warned that constraints on airwave expansion will cause operations to charge higher prices, lower quality, or throttling services in order to compensate for tight spectrum.
According to the FCC, the agency has been diligently approving hundreds of wireless transactions involving around 1,000 spectrum licenses, some involving licenses valued at billions of dollars. After the FCC halted AT&T’s transaction with T-Mobile USA, the former was granted approval from federal regulators for a $1.93 billion purchase of Qualcomm (NASDAQ:QCOM) airwaves in December. Currently, AT&T is rumored to be engaging in talks to purchase Leap Wireless International (NASDAQ:LEAP).
The industry is waiting on the results of the Verizon and cable companies deal, and is hoping that the government would weigh in on the agreement. The deal will allow Verizon to purchase a large chunk of unused spectrum from a group led by Comcast. AT&T believes that companies should be able to buy and sell spectrum more freely, and that the FCC should let companies better satisfy regional demand.
On the other hand, the FCC asserts that it is merely trying to maintain a balance in the allocation of spectrum so that consumers have several services to choose from. The FCC is trying to even out the playing field by ensuring enough competition to keep prices down.
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