Verizon to buy spectrum leases from Clearwire as US telco's struggle to acquire airwaves rights

As per a latest news report in Wall street journal, Verizon Wireless has offered to pay as much a $1.5 billion to buy spectrum leases from Clearwire Corp. That’s about 8000 Crores in Indian Rupees. However, Verizon Wireless hasn't made an offer for spectrum that Clearwire owns. Clearwire owns some spectrum but it leases other spectrum from third parties so it can offer a nationwide network. Any bid for Clearwire spectrum could face hurdles if Sprint doesn't approve. Sprint has a number of contractual rights that pose steep obstacles for any outsider trying to do a deal.

The entire news is contrary to earlier reports according to which Clearwire had agreed to sell itself to part-owner Sprint Nextel Corp.  and Sprint agreed to sell a controlling stake in itself to Japan's Softbank Corp.

Strangely Sprint has always been looked upon as a company who would be interested in Clearwire’s spectrum. As of 2010, Clearwire was  licensed 133 MHz of spectrum, and Sprint had 51 MHz. Their combined 184 MHz represented more twice the holdings of Verizon (83 MHz) and AT&T (77 MHz), and nearly four times T-Mobile's haul (48 MHz). However, Verizon has been quietly amassing spectrum since then. Last year, the company paid $3.9 billion to acquire spectrum licenses from a group of cable companies including Comcast Corp and Time Warner Cable Inc. An access to Clearwire’s spectrum would have given Spirint an ability to compete with rivals like AT&T  and Verizon.

Clearwire's spectrum is in the 2.5 GHz (2,500 MHz) range, a band where signals don't easily penetrate walls and weaken significantly over long distances, requiring way more cell towers to transmit signal as lower-band airwaves. Verizon's spectrum in the 700 MHz band, acquired at more than $9 billion because it travels over long distances and easily passes through buildings for indoor coverage. On the positive side, the 2.5 GHz range is potentially perfect for small cells, since the higher bands can carry more data over a MHz of spectrum than lower bands, and they have less potential for interference. Some of the bigger markets like China, India and Japan are planning LTE roll outs in 2.5 GHz band. Thus the Verizon offer seems to throw open speculations that Verizon might complement it’s network in 700 MHz with small cells operating in 2.5 GHz. The U.S. telcos appear to be  evolving toward a model in which they will use the lower bands for voice and the higher bands for data transmission including video, streaming tv and cable programming.