Sprint Nextel Corporation (NYSE:S) has sizable high-frequency spectrum holdings, while AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ) have historically focused on building up low-frequency holdings due to better propagation characteristics. Ma Bell and Big Red have so many low-frequency licenses that regulators have been interested in stacking the odds of future auctions in favor of smaller rivals, including Sprint Nextel Corporation (NYSE:S). That previous Department of Justice filing with the Federal Communications Commission was before the SoftBank merger, though, so it’s possible that the DoJ’s stance has changed.
Using lower-frequency bands has yielded cost efficiencies, since the larger carriers can expand their reach with lower infrastructure spending. The trade-off has been lower data speeds at times, depending on a number of factors. However, the premium value of these increased propagation characteristics for low-frequency bands may decline in the future as carriers beef up networks and infrastructures become denser.
Sprint Nextel Corporation (NYSE:S)’s high-frequency licenses aren’t paired like low-frequency licenses are. Most domestic carriers use frequency-division duplex, or FDD, LTE, which uses a pair of spectrum bands — one for downlink and one for uplink. Spectrum paired for FDD use could be considered inefficient, since the majority of mobile data is downloaded as opposed to uploaded.
That’s why time-division duplex, or TDD, LTE has begun to gain traction in certain parts of the world like China and Japan (SoftBank was a TDD-LTE pioneer in Asia). TDD-LTE is a more efficient use of spectrum since signals are separated by time and TDD adapts to whatever signal is needed at the time as opposed to pre-specified designations. When data transmissions are asymmetrical, TDD is a much better use of limited spectrum.
Having all that spectrum is one thing, while putting it to use is another. Sprint Nextel Corporation (NYSE:S) will need to spend the next few years aggressively building out its network, but that’s precisely where SoftBank comes in. Not only does SoftBank have expertise in LTE deployments, it also injected billions of dollars into the company to bolster its balance sheet.
Another challenge will be to get TD-LTE compatible devices if Sprint Nextel Corporation (NYSE:S) chooses to go with that route. Following the Clearwire acquisition, Sprint is also sitting on considerable debt.
Sprint Nextel Corporation (NYSE:S) has a clear path to building a state-of-the-art LTE network that could put pressure on AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ), but it’s not without road hazards.
The article 1 Advantage Sprint Now Has Over AT&T and Verizon originally appeared on Fool.com.
Fool contributor Evan Niu, CFA, owns shares of Verizon Communications Inc. (NYSE:VZ). The Motley Fool has no position in any of the stocks mentioned.
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