Ownership of well-placed spectrum is of utmost importance in determining an operator’s chances of success.

The federal government auctions spectrum and collects billions of dollars from the proceeds of the auctions. It is worth the money because the demand for commercial broadband services is skyrocketing year over year and spectrum enables network operators to offer more capacity over their networks. But when the auctions are won and those that have been successful move forward to build out enhancements to their networks or new networks, those who did not come away with additional spectrum have to figure out what to do next.

After the auctions, the currency of the commercial wireless world is not money, it is spectrum, which is a finite resource. We cannot make any more of it, we can only use it more efficiently. Those that have it are in a good position and those that lack it are in jeopardy of not being able to compete. When AT&T acquired Cingular (or was it the other way around?), AT&T had spectrum and Cingular had some but not enough to compete in the coming 3G and 4G worlds of wireless.

The AT&T and T-Mobile USA deal is about spectrum and cell sites. AT&T wants more broadband spectrum and more cell sites, and T-Mobile has some spectrum and a lot of sites but not enough spectrum to compete in the world of 4G. So the deal was conceived and done, but the Justice Department is slowing it down. I don’t think it won’t happen, just that what AT&T ends up with will be different from what it envisioned. If the deals fall apart, AT&T will still be one of the two major nationwide network operators, but T-Mobile will have to scramble to find another way to gain spectrum it needs if it is to compete with AT&T and Verizon.

The Justice Department is looking at the AT&T and T-Mobile deal on a nationwide basis, saying that we would be going from four to three nationwide network operators and that this would stifle competition and cost consumers more. I have to wonder about that. A few years ago, China decided to combine network operators. There were six and the number was reduced to three, in order to spur growth and lower prices to consumers, and that is exactly what happened.

If the Justice Department took the time to investigate the top 100 markets, it would see that there are actually five or six network providers in each of these markets, so losing one would have very little effect on the overall landscape. But this is not an article about AT&T and T-Mobile; it is an article about what motivates commercial network operators after the auctions are over. The short answer is spectrum. Those who have it know they have a valuable resource and those who don’t have it know they need to find a way to obtain more or end up selling themselves to a company that wants their spectrum.

The issue here is that in order to be able to offer broadband wireless services to your customers, you need spectrum, lots of spectrum. In the old days of cellular when it was all about voice, you could compete with 30 or 40 MHz of spectrum since each voice channel occupied only 8 KHz of spectrum. Today if you want to be able to offer broadband data rates above 5 Mbps, you need at least 10 MHz of spectrum (5 MHz X 5 MHz), and if you want to serve a large urban population, you need much more than that.

Verizon Wireless’ LTE network is currently operating at 700 MHz in 22 MHz of spectrum and is running 10 MHz down to the users and 10 MHz from the users up to the network. Its data speeds are very good, 12-15 Mbps down and 2-5 Mbps up, but as the network becomes more congested, the data rates will drop. Verizon has a couple of choices since it has spectrum. It can convert some of its 3G spectrum to 4G, it can move voice to its 4G network (but that is not as efficient today as keeping voice on its 2G network), or it can find more spectrum in the future.

AT&T is in a similar boat. It can use more spectrum for broadband data or build more sites to add capacity or both. The issue with adding more sites in order to gain more capacity is that this is a very time-consuming process. In some areas, it takes as much as three years to add a cell site and with data demand doubling year over year, that formula just does not work. So spectrum, who has it and who needs it, becomes the issue of the day.

We aren’t talking about just any spectrum; what is needed is spectrum that is good for mobile voice and data services. Much of the spectrum held by others, including public safety, is below 500 MHz and is not well suited for handheld voice and broadband systems. Spectrum at about 3 GHz requires so many cell sites in a given area as to be uneconomical for network operators to deploy. Then, of course, is the issue of how many different portions of the spectrum you can build into a mobile device, how many different antennas are needed, and what that does to the battery life of the device.

So good spectrum for mobile services is the key to success in the commercial wireless space. Those that have it are at an advantage; those that don’t probably cannot survive. So perhaps it is better to let market forces determine who survives and who does not rather than a few people in Washington, D.C., who don’t truly understand the issues.

It goes back to basics. Those that have spectrum win; those that don’t lose. Part of the problem is caused by those who say, “I want solid wireless coverage for my phone BUT I don’t want cell sites in my neighborhood.” In a world where there have to be trade-offs, it seems to me that market forces should be allowed to work. This will ensure that consumers will have the best possible services available at the best possible pricing. Forcing solutions on a market-driven society is never a good thing.

Seybold heads Andrew Seybold Inc., which provides consulting, educational and publishing services. For more information, visit www.andrewseybold.com.