Five Ways U.S. Airwaves Auction May Change Mobile Service

Verizon Communications Inc. (VZ) and Dish
Network Corp. (DISH) are among 70 companies that can start bidding for
blocks of radio airwaves tomorrow in a U.S. auction designed to
help get data to your mobile phone faster.

Think of it as a chance for congested networks to add
capacity to keep videos from YouTube and Netflix Inc. streaming
smoothly to mobile phones and tablets.

The Federal Communications Commission's so-called Advanced
Wireless Services auction is billed as the biggest spectrum sale
in six years and may bring in $15 billion. We'll find out the
winners in a few weeks. Here's what you need to know:

CONSUMERS CAN GET BUFFER-FREE MOBILE VIDEO — The auction
is one of several that the government has lined up to provide
more frequencies for use by phones, tablets and other mobile
devices. The extra airwaves will help wireless carriers fix
spotty coverage and add capacity where their networks are
overloaded. It will also help get information to your smartphone
more quickly and smoothly. Missing out on the auction could be a
setback for customer service.

VERIZON NEEDS SPECTRUM THE MOST — Network congestion
caused Verizon's speed to fall behind AT&T Inc. (T) last year, and
the company then made sweeping upgrades to double the pace at
which it delivers videos and data. To maintain its reputation
for network quality, Verizon is going to need more AWS spectrum,
which is compatible with its current airwaves.

"This auction is incredibly important to Verizon," said
Jennifer Fritzsche, an analyst with Wells Fargo & Co. "They've
put a lot of money on AWS, which they've branded as XLTE to
consumers. They need more."

T-MOBILE HAS MOST TO GAIN — As the smallest national
carrier, T-Mobile has played the underdog role fairly
effectively, particularly when it comes to competing on price.
T-Mobile's also been able to compete on service quality by
focusing on dense coverage in cities instead of blanketing the
whole country. T-Mobile and Verizon were top bidders in a
similar AWS auction in 2006.

SPRINT WILL SIT THIS ONE OUT — Sprint is the only major
U.S. wireless carrier to not participate in this auction. The
company opted out in September, a month after a plan to merge
with T-Mobile fell apart and Marcelo Claure was hired as the new
chief executive officer to reverse years of customer losses.

For AT&T, these particular bands of radio waves aren't the
best fit. AT&T was one of the winners of the 2006 AWS auction.
Four years later, it was forced to give T-Mobile a large block
of that spectrum as part of a penalty when the 2010 merger
failed.

DISH'S CHARLIE ERGEN MAY DRIVE UP THE PRICE — Dish Network
Corp.'s Chairman Charlie Ergen already has billions of dollars
of spectrum that he isn't using. The question is whether he'll
start his own wireless service, sell the holdings or lease the
airwaves to needy rivals.

One thing's for sure: This auction will set a new baseline
value for the spectrum he already owns. With so much on the
line, Dish may try to pad the price with a high bid. This could
backfire on Dish, the second-largest U.S. satellite TV operator
that has no wireless network.

"It wouldn't surprise me if his strategy is to get people
to recognize his spectrum's value," said Tim Farrar, founder of
research firm Telecom, Media and Finance Associates Inc.
"Depending on how aggressive he is, AT&T and Verizon could
leave him to spend billions on spectrum he wouldn't use."

To contact the reporters on this story:
Scott Moritz in New York at
smoritz6@bloomberg.net;
Todd Shields in Washington at
tshields3@bloomberg.net

To contact the editors responsible for this story:
Sarah Rabil at
srabil@bloomberg.net;
Jon Morgan at
jmorgan97@bloomberg.net
Elizabeth Wasserman

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