When Verizon Wireless said last year that it would sell off some of its 700 MHz A- and B-block spectrum, there was wide speculation that just about any other wireless carrier would be a bidder. With mobile data usage skyrocketing, carriers big and small are seeking spectrum wherever they can find it.

To date, however, Verizon has made only a few spectrum sales – and these have involved a small number of licenses sold primarily to small rural carriers that plan to use the spectrum for fixed wireless services as an alternative to low-speed DSL.

Is this simply because a few big bidders are vying for the remaining spectrum, which includes some of the nation’s largest metro areas? Or is another dynamic involved?

The value of the spectrum that is in play could be substantially higher if the industry could reach a solution to 700 MHz interoperability issues that have been hotly debated for more than a year. And perhaps the reason the Verizon spectrum sales are moving at such a slow pace is that bids by other carriers are contingent on a resolution of this issue. Indeed, it would seem foolhardy for a large carrier to bid on this spectrum without such contingencies.

The 700 MHz interoperability issues are complex, but bear with me as I outline them.

700 MHz Interoperability Issues
Spectrum in the 700 MHz band was made available through the digital TV transition, which freed up spectrum previously used for UHF television broadcasts. The government auctioned the spectrum in several different blocks in at least two separate auctions.

International standards bodies also played a role in the 700 MHz arena, as they are responsible for establishing different band classes, which define the requirements of components used to manufacture wireless devices.

In the case of the 700 MHz band, one of the spectrum blocks that was auctioned off – the upper C-block – was wider than the others. Verizon Wireless won most of that spectrum, which was designated as Band 13 by international standards bodies.

Other 700 MHz spectrum blocks that were auctioned were narrower and therefore were combined into a single band according to international standards. The lower A- and B- blocks, now most often referred to simply as the A- and B-blocks, were included in the same band as the lower C-block – and that band was designated as Band 12.

700 MHz Band Plan

700 MHz Band Plan (Source: FCC)

AT&T bought most of the lower C-block and some B-block spectrum, while Verizon and numerous small carriers bought the A- and B-block spectrum. Verizon never built out its A- and B-block spectrum, which it is now selling, instead focusing on its more extensive upper C-block holdings.

AT&T has been building out its spectrum, but although its spectrum started out in Band 12, it hasn’t been using Band 12 components. The reason is that AT&T, citing potential interference problems with the A-block, persuaded international standards bodies to create a new band class known as Band 17 that would include only the lower B- and C- blocks. AT&T has used Band 17 chips in its 4G handsets.

Smaller carriers dispute AT&T’s claims about interference problems. (More on the interference issue later.)

AT&T’s decision not to use Band 12 chips has complicated things for small telcos that hold A-block spectrum because it has been difficult to persuade device manufacturers to build Band 12 devices at reasonable prices, if at all, because of the small volumes involved. Accordingly A-block deployments have lagged and rural carrier associations last year asked for an extension to A-block buildout deadlines because of these issues.

Knowledgeable sources tell me it’s quite common for small telcos to hold A- and B-block spectrum and even though those telcos could use Band 17 devices in the B-block, they are reluctant to invest in a product that can only work on part of their network. Accordingly the 700 A- block problem to some extent is a B-block problem as well.

Early last year the FCC asked the industry to investigate solutions that would achieve device interoperability in the lower 700 MHz bands. To date the commission has not taken any action on this issue – but it also has not yet rejected the concept.

AT&T’s predicament
It’s important to note that the A-block spectrum Verizon has put up for sale includes licenses in numerous large metro areas – including New York, Los Angeles, Philadelphia and some of the nation’s other largest markets.

One might expect AT&T, which has been pleading a spectrum shortage since its plan to purchase T-Mobile was nixed, to want to find a solution to any A-block interference problem that may exist so that it could buy some of the Verizon A-block spectrum. And if such a purchase were to occur, AT&T would want any device working in that spectrum band to also work on its existing network – in other words, the company would want the exact device it has been fighting.

If AT&T were ever to be open to a solution that would involve creating a device to work across the lower A-, B- and C-blocks, that time would be now.

As recently as September, however, AT&T was arguing against a device that would work in its spectrum band and the A-block. In a blog post, an AT&T executive advised carriers requiring a Band 12 device to partner up with T-Mobile and Sprint, both of whom are deploying LTE in bands outside 700 MHz.  The idea would be to obtain sufficient volumes by creating a multi-band device. And it’s possible that T-Mobile and/or Sprint could be pursuing such a device as well as pursuing some of Verizon’s A- and B-block spectrum.

Those carriers may be wary in view of AT&T’s claims about A-block interference, however. And both Sprint and T-Mobile are pursuing an alternative approach to obtaining spectrum — acquiring another carrier.

Is interference a problem?
In persuading international standards bodies to separate out the A-band, AT&T cited two types of interference with that band, which includes 12 MHz of paired spectrum. One problem, according to AT&T, was the half of the pair that is adjacent to Channel 51, which is still operational in some markets. The other problem AT&T cited involved the other half of the A-block pair that is adjacent to the E-block. The E-block is unpaired spectrum that at one time was used for a mobile video broadcast service that has since been closed down. The spectrum is not currently in use.

Small carriers argue that there are no interference problems with the A-block involving Channel 51 or the E-block that would impair mobile wireless service and have commissioned two separate studies they say were based on real-world tests that support that view. AT&T’s claims, they say, were not based on real-world testing.

Wireless consultant Andrew Seybold has considerable knowledge about the 700 MHz band because of work he has done in support of a nationwide public safety network in the 700 MHz D-band, making him a more impartial observer than AT&T or the small carriers. And although he opposes an interoperability requirement across the entire 700 MHz band, arguing that it would make devices too costly and put the public safety network at risk, he said he doesn’t see any problems that should prevent interoperability across the lower 700 MHz band.

He noted that there are only about 30 broadcasters on Channel 51 today and if there are any problems related to the A-block they would be “marginal” and would be limited to a small fraction of those markets. He also noted that television broadcasters are expected to be moved off of Channel 51 as part of the planned incentive auction of TV broadcast spectrum.

As for the currently vacant E-block, Seybold noted that AT&T owns some E-block licenses, while Dish Network holds the balance. He said AT&T has said that it plans to use its E-block spectrum to offload streaming video and that such an application would not pose interference problems. He believes Dish will sell its E-block spectrum and that AT&T would be a likely buyer. Such a move would enable AT&T to use the spectrum to support its streaming video offload plans nationwide.

Where there’s a will is there a way?
If AT&T were to have a change of heart and accept a Band 12 device, some stakeholders have said small carriers could still face some significant hurdles in obtaining devices at reasonable rates. The reason is that carriers with 3G networks that are building out 4G in the A- or B-block will need to be able to fall back on 3G when 4G is not available. And smaller carriers are more likely to have used CDMA for 3G than the GSM 3G solution that AT&T chose – and has specified for its LTE devices.

Small carriers have argued that not all companies deploying 4G have 3G networks, that there are still cost benefits to lower 700 MHz interoperability regardless of what 3G network technology a device may use and that 3G issues eventually will become irrelevant.

Considering all the creativity that has been put into freeing up spectrum in recent years, it seems like a similar level of creativity ought to be applied – and hopefully is being applied — to solving interoperability issues. And considering that Verizon has a considerable amount of A-block (and B-block) spectrum sitting idle, a solution to the A-block (and related B-block) problem would seem to be good news for any carrier — and in the long run for consumers, who would ultimately benefit from more mobile data capacity.