AT&T could spend almost $2 billion on network upgrade

Dec 21, 2010
Finance

It’ll be a while before the effects might be felt, but AT&T (T) is working to close a deal that could drastically improve its cellular phone service in the future. According to Ars Technica, today the company announced a deal with Qualcomm, in which AT&T would pay $1.925 billion for a chunk of the wireless […]

It’ll be a while before the effects might be felt, but AT&T (T) is working to close a deal that could drastically improve its cellular phone service in the future.

According to Ars Technica, today the company announced a deal with Qualcomm, in which AT&T would pay $1.925 billion for a chunk of the wireless broadcast spectrum. If the plan goes through, and once new handsets have been developed to handle the upgrade, AT&T would have access to a more powerful wireless signal for urban areas that covers hundreds of millions of people in the U.S.

Right now, this means two things: (1) iPhone service through AT&T could drastically improve in the future, and (2) iPhone owners won’t be seeing that improvement at least until the next generation of iPhone is released.

Before we go further, lets explain what this is all about. When it comes to broadcasting signals, like radio, television, and cellular signals, there’s only so much electromagnetic spectrum to go around. Different devices function at different frequencies: FM radio might broadcast around 108 megahertz, for example, while, say, a wireless Internet router broadcasts at 2400Mhz. When you tune your radio, you’re tuning to different frequencies on the spectrum. The difference allows signals to avoid interfering with each other, but since there are a limited number of frequencies, the government regulates and licenses them to companies for different uses. This is the reason TV stations have to carry emergency broadcasts and political debates — it’s part of the licensing agreement with the Federal Communication Commission.

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When TV signals were flipped from analog to digital in 2009, the FCC suddenly had more bandwidth available, because the TV signals now are more efficient. So the remaining bandwidth was auctioned off to different companies in chunks. Qualcomm (QCOM) got one of those chunks; AT&T is trying to buy part of it. In its article, Ars Technica linked to this great graphic from Conde Nast Portfolio to help explain, and so will I.

Basically, AT&T will use the new spectrum, if it is able to buy it, to support the 4G network it’s currently developing. But that’s a big if — for one thing, the deal won’t close until after summer 2011, if it does at all.

For another, AT&T’s purchase would concentrate a huge chunk of bandwidth in the hands of a single company, which will undoubtedly draw scrutiny from federal regulators looking to avoid AT&T gaining any kind of monopoly.

So when it comes right down to it, regardless of what happens with the deal, we won’t be seeing any gains in service through AT&T anytime soon. But even a small glimmer of hope is better than nothing, seeing as Consumer Reports voted AT&T service the worst in the business this year.

If AT&T gets its way, however, it might be producing quite a contender of a 4G network. That kind of support for its smartphones could help it battle back Verizon (VZ), should that company actually get hold of the iPhone next year, as the rumors continually claim.

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Phil Hornshaw

Phil Hornshaw is a freelance writer, editor and author living in Los Angeles, dividing his time between playing video games, playing video games on his cell phone, and writing about playing video games. He’s also the co-author of So You Created a Wormhole: The Time Traveler’s Guide to Time Travel, which attempts to mix time travel pop culture with some semblance of science, as well as tips on the appropriate means of riding dinosaurs. Check out his profile.

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