Now that AT&T (T) and Verizon Wireless have picked up oodles of spectrum at the FCC auctions, investors want to know what all that money went for. The answer is that both companies plan to build ultra-fast wireless networks, known as 4G. That is bad for the cable companies and firms like Sprint (S) and Clearwire (CLWR) who hope to build their own over-the-air national broadband system.
The two largest cellular providers in the US, AT&T and Verizon, have a huge advantage in deploying 4G. Each has over 60 million customers. Sprint is having customer service problems which is making it hard to hang onto its 50 million. Sprint plans to roll-out a WiMax fast broadband service nationally in about two years. But, the company cannot come up with the $5 billion to get that done. Proponents of WiMax including Intel (INTC) and Motorola (MOT) have not stepped up with the funds.
The biggest loser in a 4G world may be cable companies. Large firms like Comcast (CMCSA) and Time Warner Cable (TWC) count on home broadband business for a large portion of their revenue. If a competing service becomes available over the air, switching could be very attractive for many consumers. Today, for customers to have wireless access to cable broadband they have to use WiFi which only has a range of a few hundred feet The AT&T and Verizon Wireless products would work almost everywhere near big and modest-sized cities.
The 4G system is coming. AT&T and Verizon have already made their critical investment by buying the necessary spectrum from the FCC. They have cable and WiMax in their cross-hairs and the capital to change the way fast internet is used.
Douglas A. McIntyre