800 MHz: What’s Next?

During T-Mobile’s recent 3Q 2024 Earnings Conference, there was news in the spectrum world, specifically around the 800 MHz band, a very underused band for mobile broadband. But as promising as this news is, T-Mobile’s statements have left many of us wondering what’s next for 800 MHz and when we will see movement.

Here’s Some Context

The 800 MHz band is frequency division duplex (FDD) spectrum of relatively small size, at least compared to other bands we have discussed. However, as a low-frequency spectrum band, it offers good propagation, making it attractive for wireless coverage. The specific focus here is on a subset of these frequencies called the Enhanced Specialized Mobile Radio (ESMR) service, shown in this band plan.

A few points to note about the 800 MHz:

1. In the 4G LTE world, you can only use 5x5 MHz due to current standards, a relatively small bandwidth today.
2. It lies next to the Cellular bands primarily used by Verizon and AT&T (3GPP band class 5).
3. To use this band, you would require devices and radios compatible with 3GPP Band class 26, meaning new hardware investments.

The ESMR band has a long and sordid history that I won’t detail here. Suffice it to say that Nextel initially used it for iDEN technology (remember the Push-to-Talk phones?). Sprint later acquired Nextel, bringing ESMR into its portfolio as a primary low-band spectrum for 3G and 4G. Ultimately, when T-Mobile bought Sprint, the latest chapter of the 800 MHz story began.

The Department of Justice Decree

T-Mobile’s acquisition of Sprint was not an easy deal to close. It took a serious and concerted effort to work with multiple state agencies, the FCC, and the Department of Justice to ensure the transaction didn’t result in competitive harms in the market. While things were generally going well, several states sued, which held the transaction up in court.

To resolve this, T-Mobile worked out an arrangement with the states’ attorneys general through the Department of Justice. This result was codified in a consent decree that had multiple stipulations.

One key requirement was that T-Mobile offer the ESMR spectrum to Dish (now Echostar) through a purchase option. Dish originally had until late 2023 to exercise this option but managed to extend the deadline to May of this year.?

However, when Echostar/Dish struggled to secure the $3.6 billion purchase price, T-Mobile was instead required to auction the spectrum. If a buyer was willing to meet the $3.6 billion price, T-Mobile would divest the spectrum. If not, T-Mobile’s restrictions on holding the spectrum would be lifted, giving them the freedom to use, lease, or sell it.

With Echostar/Dish facing significant financial challenges this year, the purchase option expired despite their efforts, and T-Mobile proceeded with the auction. Until the recent Q3 earnings call, there hadn’t been much news on this front.

What Did T-Mobile Say?

Here’s what T-Mobile’s President of Technology, Ulf Ewaldsson, had to say:

“On the 800 band, we concluded the auction without really a bid that was qualifying. That gives us now new optionality really. We can either deploy it or we could look at doing something to benefit monetarily from it. So we have those optionalities as we go forward. We're always working on our spectrum portfolio and continue to build this leading 5G network based on it.”

T-Mobile CEO Mike Sievert added:

“As it relates to 800, as Ulf said, there's a lot of optionality for 800 now. We were required to sell it as an artifact of the merger and the consent decree and to auction it under a set of auction rules. We did that and there wasn't a qualifying bid as defined in the consent decree. And so we're no longer are required to sell it. That gives us optionality. I'll remind you of a few things that Peter has said, one, proceeds from selling it are not currently in our financial plan.”

“So should we sell that spectrum, that will be, in essence, incremental. And secondly, in Ulf's network plan, utilizing that spectrum is not currently in the plan. So the reason I point this out is that just we have a lot of optionality and that's valuable spectrum. It's important spectrum. And you'll have to stay tuned as it relates to our resolution on how we plan to use it.”

In essence, T-Mobile ran the auction and received bids but didn’t get one that met the consent decree requirements. Now, freed from the obligation to sell, T-Mobile has full control over the spectrum. With no expectations set around the spectrum in their current plans, anything they decide to do with it would be an added benefit.

So, What’s Next?

The real question now is: what could T-Mobile do with this spectrum now that they have the free reign to align it with their strategy?

One compounding issue, less known to many, is that while T-Mobile holds this spectrum, it limits their ability to acquire other low-band spectrum, especially anything below the 1 GHz range, on the secondary market.?

Here’s why: this spectrum counts toward T-Mobile’s total holdings in any market. If T-Mobile tries to acquire additional spectrum in a given market, it might trigger what’s known as the “spectrum screen” or the “low band threshold,” which subjects the transaction to stricter regulatory scrutiny and potentially a higher bar for approval.

This factor is especially relevant if T-Mobile is eyeing acquisitions in the 600 MHz band, where holding onto the 800 MHz spectrum could be a potential roadblock to approval. While this is not an outright “no,” it certainly complicates and extends the process, giving T-Mobile a reason to consider selling or leasing the spectrum long-term to avoid regulatory friction.

For a more in-depth analysis of this issue,?Brian Goemmer?and I explored this topic thoroughly in our report, “800 MHz: What’s Next”, released earlier this year (note: the report was written before the auction results were known).

In the end, I believe T-Mobile has four main options ahead, each with multiple nuanced opportunities.

1. Deploy the spectrum

The first option is for T-Mobile to deploy this spectrum into their network, which could bring additional utility. However, this move would require a significant capital investment and increased operational expenses to implement and maintain an entirely new radio band across their network.

Potential reasons or use cases could include:

• Additional network capacity, but as I noted earlier, this doesn’t provide a lot of capacity, and T-Mobile has plenty of other spectrum at the moment.
• Deployment for dedicated industrial IoT types of networks given the band's propagation and capacity for sensor-type uses (think utility networks or smart grid applications).
• Deployment for new generation networks, like 6G, as a coverage layer. However, 6G is still a long way off.

2. Lease the spectrum

Another option for T-Mobile is to lease the spectrum to others, generating short-term leasing revenue or other win-win economics.

Potential reasons or use cases could include:

• Leasing to utility or other IoT-based users who need the 800 MHz band for industrial IOT or smart network applications.
• Similar to above, leasing the spectrum for private network uses. I would note this could cannibalize T-Mobile opportunities with dedicated network slicing, but this is certainly an option.
• Creating an MVNO-like model on the 800 MHz, possibly targeting rural broadband providers or other parties interested in mobile network capabilities.

3. Sell the spectrum

T-Mobile could also choose to monetize the spectrum through direct sales. After running an auction, they now have valuable market insights into potential price points and demand. They might consider selling the spectrum either as a whole or in parts.

Another factor to consider in a sell option is the extended timeline we’re experiencing for any new spectrum in the U.S. pipeline. This factor could increase its value for some parties over time as a paucity of spectrum becomes a problem. Also, it’s important to note that if Echostar achieves greater financial flexibility with its ongoing transaction with TPG, there’s a possibility they could revisit a purchase—though it’s unlikely to happen for anything under $3.6 billion.

4. Do Nothing

While highly unlikely, T-Mobile could just adopt a “sit and wait” approach. They have a full plate of activities and very good results at the moment. They have time to be thoughtful and make choices that best meet the needs of their shareholders.

From my perspective, there are two main external factors that could push T-Mobile to make a decision on this spectrum sooner rather than later.

First is the constraint the spectrum places on their secondary market transactions, as mentioned earlier. However, T-Mobile could selectively sell or lease that spectrum to alleviate that pressure.

Second, a review of the Universal Licensing System shows that the license for this spectrum doesn’t expire until June 2028. By that time, T-Mobile would need to demonstrate adequate coverage, giving them ample time to do what works best for them.

While it can be fun to generate ideas, the reality is that the only people who know what comes next for 800 MHz is T-Mobile.

What are your thoughts on how T-Mobile should proceed with the 800 MHz band, and when that might happen?

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