AT&T/EchoStar Likely Won't Reduce Pressure to Make Spectrum Available for 6G

FCC Commissioner Anna Gomez was sharply critical of agency pressure on EchoStar to sell its spectrum. Industry experts said the transaction is unlikely to reduce pressure on the government to make more spectrum available for 6G. AT&T officials said they expect the transaction to close in about a year.

AT&T is getting 600 MHz and 3.45 GHz licenses, for which EchoStar paid about $13.5 billion, Bank of America said Tuesday. That was about 90 cents MHz/POP, compared with the $1.40 MHz/POP AT&T agreed to pay, it said. “The acquisition price also reflects enhanced value from the AT&T/EchoStar MVNO agreement.” AT&T already has a deal pending to buy 3.45 GHz and 700 MHz spectrum from UScellular (see 2504280052).

“The FCC’s role in how we got to this place raises serious concerns,” Gomez said in an emailed statement. “Rather than serving as a neutral regulator, the FCC has once again mounted a pressure campaign on a private company, putting the agency’s thumb on the scale in ways that risks distorting the wireless marketplace to the detriment of consumers.” Gomez said she would look closely at the deal “to ensure it safeguards consumer interests and that competition in the wireless industry remains strong.”

The FCC emailed that it “appreciate[s] the productive and ongoing discussions with the EchoStar team.” The agency said it “will continue to focus on ensuring the beneficial use of scarce spectrum resources.”

During a call with analysts, AT&T CEO John Stankey called the deal “an opportunistic and preemptive asset acquisition.” It will mean putting currently fallow spectrum to use quickly, “improving network performance, and cost-effectively adding capacity at lower marginal costs than planned network densification.” The purchase will enhance AT&T’s push “to transition customers from legacy copper-based phone and internet services to next-generation connectivity such as Internet Air and AT&T Phone Advanced in areas” that don’t have fiber, Stankey said.

Carriers will only see data demands grow as a result of “emerging AI and IOT use cases, such as AI-native devices, autonomous vehicles and advanced robotics,” Stankey added.

Recon Analytics’ Roger Entner told us the deal likely doesn’t mean that policymakers will see reduced pressure to make more spectrum available for licensed use. “I would argue that Verizon needs additional spectrum more than AT&T.”

Entner said in a note to investors that the transaction is a big win for AT&T. The company “acquires approximately 30 MHz of nationwide 3.45 GHz mid-band spectrum and 20 MHz of 600 MHz low-band spectrum, assets critical for 5G capacity and coverage. This immediately improves AT&T's ability to compete on network performance,” he wrote. “The enhanced wholesale agreement makes AT&T the primary network for Boost Mobile's customers, providing a stable, long-term revenue stream and a dedicated flanker brand to counter the value-segment assault from cable and T-Mobile's prepaid offerings.”

The U.S. is already looking ahead at what infrastructure will be needed for 6G, “and that will demand a steady pipeline of spectrum allocations,” said Kristian Stout, innovation policy director for the International Center for Law & Economics. “AT&T may have addressed a near-term need for 5G deployment,” but “the longer-term question of how to keep U.S. networks at the frontier of performance is still very much on the table.”

Joe Kane, the Information Technology and Innovation Foundation's director of broadband and spectrum policy, said spectrum policy shouldn’t be about “the short-term needs” of carriers. The FCC should seek to make spectrum “as available and flexible as possible for future uses, too, including 6G and satellite, but also unforeseen use cases that may only come about if there is enough spectrum in the market.”

DOJ Questions

Industry officials agreed there are more questions about how DOJ will view the transaction than about the FCC. In comments on T-Mobile’s buy of spectrum from UScellular, DOJ Antitrust Division Chief Gail Slater raised concerns about spectrum consolidation (see 2507110045).

Gibson Dunn’s Svetlana Gans, a former FTC chief of staff, noted the concerns during an ITIF webinar Tuesday (see 2508260048). “Some facts were problematic for" Slater, Gans said. But “overall, based on the competitive analysis, she thought consumers would be better off” as a result of the transaction, Gans said. DOJ and the FCC “have different competition criteria in their merger analysis.”

The spectrum pie “is shrinking,” former FCC Commissioner Mike O’Rielly said, also during the webinar. “The small players are probably not going to grow into larger players,” he said. “We’re going to have three very strong nationwide providers for wireless service.” The Trump administration seems to be signaling that it’s more open to mergers and other transactions than the Biden administration, O’Rielly added.

The spectrum deal “is not a big surprise,” emailed spectrum and satellite consultant Tim Farrar. He said the AT&T deal, plus EchoStar’s announced low earth orbit direct-to-device constellation using the 2 GHz band (see 2508010005), is a counteroffer to the FCC’s probe of EchoStar’s terrestrial buildout and its AWS-4 spectrum use (see 2505130003). If FCC Chairman Brendan Carr accepts this, then the EchoStar D2D constellation lets the company keep the AWS-4 band, Farrar said. Some of the spectrum could still be used in cities for terrestrial wireless use, potentially via leases to Verizon, and all the spectrum could be used in rural areas where there isn’t big terrestrial value, he said.

The AT&T deal provides the funding to build the satellite constellation, Farrar noted.

More EchoStar Sales Seen

Some said they expect to see further EchoStar spectrum sales. Frank Rayal of telecom advisory firm Xona Partners told us EchoStar’s AWS-3 holdings could net several billion dollars.

EchoStar “is now in full liquidation mode,” with more spectrum sales to follow, MoffettNathanson’s Craig Moffett wrote investors. “Perhaps the only negative here is that, by selling outside of bankruptcy, EchoStar’s roughly $15B of tower lease agreements will remain in place and will therefore act as an additional layer of debt that will need to be satisfied before equity holders can get their hands on the proceeds.” The idea EchoStar would file for bankruptcy in the near future is now off the table, Moffett said.

Farrar said an EchoStar/Verizon deal involving the sale of EchoStar’s AWS-3 and a lease of its urban AWS-4 before the end of the year would mean EchoStar doesn’t have to underwrite the FCC’s AWS-3 reauction.

Rayal told us the FCC could have been aware of the EchoStar/AT&T talks, since AT&T would need a waiver of the cap on its 3.45 GHz holdings. The deal is a big risk for EchoStar, he said, as it effectively exits the facilities-based carrier space and pivots to a D2D business model. Its remaining AWS-3 and AWS-4 spectrum won’t be enough for a mobile network play, Rayal noted. EchoStar’s MVNO agreement means the company will see thinner margins than it would have with its own mobile network, he said.

Rayal also said it’s not clear if the FCC will be satisfied. EchoStar having smaller spectrum assets and using proceeds from the AT&T deal to build its D2D satellite constellation means that the FCC has less ammunition to go after the company, Rayal said. The deal makes EchoStar “much more credible” as a constellation builder and operator, he said.

William Blair’s Louie DiPalma wrote investors that the AT&T/EchoStar transaction greases the path for Viasat to set up spectrum deals outside the U.S., noting that those deals could be valued at as much as $2 billion. Viasat has 68 MHz of L-band spectrum with similar propagation characteristics as the spectrum AT&T is acquiring, DiPalma said, and Viasat doesn’t appear to be fully using the spectrum in every nation.

Before any FCC approval of the AT&T/EchoStar deal, "we need to be clear about what’s at stake: competition,” Boost Mobile founder Peter Adderton wrote. “If this deal is approved, it can’t be business as usual with recycled promises about Boost’s future,” he said, adding that the FCC “needs to put real protections and wholesale rules in place” that allow independent MVNOs to compete. The commission also must require fixed broadband providers like Comcast and Charter to wholesale out their networks to MVNOs if true competition is the end game, he said. “History shows that without broader support and wider MVNO participation, consumers will lose out.”

Summit Ridge Group President Armand Musey said private deals often go for higher amounts than FCC auctions, since they can be structured to maximize value -- in this case, AT&T is able to lease the spectrum until the deal closes. Also helping drive the value in the deal is that spectrum license value is concentrated in the low band for coverage, such as 600 MHz, and in midband, where massive multiple-input multiple-output technology can be deployed for capacity, such as 3.45 GHz. He said there’s less demand for spectrum in the middle, such as 1-2 GHz.