Is the Sprint Lawsuit a Spectrum Play?

Carl Weinschenk

Verizon Wireless has found a source of exciting play dates with cable operators via a deal at the beginning of December with Comcast, Time Warner Cable and Bright House Networks and, last week, with Cox Communications.

The need to reach out and make new cable friends clearly doesn't extend to Sprint, however. Bloomberg and other sites are reporting that the telephone company has filed suit against Cable One and three of Verizon Wireless's new friends over VoIP patents that they say were infringed upon. The stories point out that Sprint won a suit against Vonage Holdings over the same patents in 2007. Vonage paid $80 million in licensing fees as a result.

The news raises a group of interesting questions. Why, for instance, has Sprint waited until now to sue? Nothing has changed in the use of VoIP for a few years, other than cable's position growing stronger. But it has been a significant player in the sector for well more than a decade. Another question: Why are only cable companies targeted? Though the answer is pretty obvious (that's where the money is), for cosmetic reasons it may have been helpful for Sprint to throw in a non-MSO VoIP provider.

The suit comes as wireless carriers prepare for the data deluge brought by the emergence of LTE. One reaction is the aforementioned deals between cable operators and Verizon Wireless, which will help the carrier add spectrum. The second was the acquisition of T-Mobile by AT&T, which also was driven by spectrum concerns. The deal's demise isn't good news for AT&T from this perspective. Writes Cecilia Kang at The Washington Post:

Some analysts, including Kevin Smithen at Macquarie Capital, worry about the future of AT&T, as it now has to deal with a data deluge on its network without the prospect of more spectrum in the pipeline.

It is possible that the Sprint suit and its timing - and the inclusion of an operator, Washington Post Company subsidiary Cable One, which usually isn't grouped with the big players - also has a spectrum angle. This is from The Washington Post's 10-K report for fiscal year 2008:

In December 2006, Cable ONE purchased in the FCC's Advanced Wireless Service auction approximately 20 MHz of spectrum in the 1.7 GHz and 2.1 GHz frequency bands in areas that cover more than 85% of the homes passed by Cable ONE's systems. This spectrum can be used to provide a variety of advanced wireless services, including fixed and mobile high-speed Internet access using WiMAX and other digital transmission systems. Licenses for this spectrum have an initial 15-year term and 10-year renewal terms.

Two things should be noted. Wired comments that the spectrum is not as desirable as that bought by Verizon Wireless in the first deal announced this month. At the same time, however, it is in the same area as that sold to the wireless carrier by Cox. Thus, it has value:

The Cox/Verizon transaction is obviously not as grand in scale as the AT&T/T-Mobile deal. And the AWS zone, way up there in the 1.7 to 2.1 GHz region, should not be confused with the coveted 700 MHz sector. The "beachfront broadband" licenses to this area of the spectrum were auctioned off in 2008 to the tune of $19.6 billion, and Cox is apparently keeping its share of that treasure.

Could it be, then, that Sprint is trying to make the cable operators more amendable to a spectrum sale along the lines of the Verizon Wireless deals? Lawsuits can be good bargaining chips and - if they are decided in the wireless carriers' favor - a good form of compensation.



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