How AT&T Could Expand Its LTE Network if the T-Mobile Deal Dies

Its not looking good for AT&T/T-Mobile. After the FCC began moving toward giving the deal an official thumbs-down, AT&T formally withdrew its application for approval. While the case is still due to be heard by the Department of Justice, that agency has already sued to block the deal, so the smart money is now on the merger which would have created the nations largest wireless carrier collapsing.

Tha! t would put AT&T back at square one in its quest to expand its nascent long-term evolution (LTE) network. AT&T debuted its LTE network in September this year, almost 10 months after Verizon became the first major carrier to offer the technologys next-generation speeds. LTE boasts a much faster data connection than 3G networks, effectively bestowing mobile devices with broadband connections.

Although AT&T is expanding LTE rapidly (six more cities recently came online, bringing the total to 15), its own filings show the rollout will extend the service to only 80% of Americans. AT&T has a plan to extend the reach of its network to 97% of the country, however that plan being to buy T-Mobile and repurpose its spectrum and infrastructure for LTE.

With the deal now in jeopardy, AT&T is in need of a Plan B for LTE. There are actually several Plan Bs that the company could try. Among them:

1. Propose T-Mobile Lite Deal

One idea thats been floated is for AT&T to completely revamp its deal with T-Mobile so it would acquire only the companys spectrum and infrastructure assets, but operations would be left alone. (This would be a bit different from the divestiture option that AT&T is said to be considering, which would see the new company sell up to 40% of T-Mobiles assets to keep the deal alive.)

In this scenario, T-Mobile continues to exist as a virtual network operator, like the former Virgin Mobile. That means the new T-Mobile would just sell wireless service, leasing its spectrum and cell towers from AT&T (and possibly others). AT&T might have to re-submit this as a separate proposal from the current deal, but it would give the company what it wants and still leave T-Mobile ostensibly autonomous.

2. Buy More Spectrum at Auction

Back in 2008, the FCC auctioned off most of the spectrum for analog TV signals after broadcasters moved to digital. It put five separate blocks of spectrum up for bids, most of which were gobbled up by either Verizon or AT&T, but one remained unsold. No one met the reserve price of $1.3 billion for the 700MHz D Block of spectrum, mainly because the FCC required the new owner to set aside parts of it for a public safety network, so it went back on the shelf.

Now its three years later, networks are expanding fast, and spectrum is more valuable than ever. The FCC hasnt scheduled another auction for the D Block yet, but when it does, shelling out a couple of billion for the spectrum even with the public safety considerations might be worth it for AT&T, especially considering its in the right frequency band for LTE.

3. Expand on Its Own

The problem with merely buying more spectrum is that it doesnt give AT&T any new equipment. In the aforementioned filing, AT&T essentially admitted that the problem with expanding LTE isnt so much spectrum as it is infrastructure. It wants all those cellphone towers and switches that T-Mobile has in place all over the country equipment it can adjust to serve its own networks at relatively little cost since the two carriers use similar technology.

AT&T will need to take a second look at those costs if its serious about expanding LTE. It may be expensive, but so is ceding large chunks of the country to Verizon. Whatever the carrier decides, LTE is the future, and its going to need a plan to bring that service to everyone in the U.S., T-Mobile or no T-Mobile.

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