AT&T to pay $2.5b for R.I. firm's frequencies
AT&T Inc. will pay $2.5 billion to a privately held Rhode Island firm for a prized chunk of unused television frequencies, in a deal that sets the stage for a major upgrade of its nationwide broadband network.
The agreement, with Aloha Partners LP of Providence, highlights the telecom industry's interest in a large and valuable segment of broadcast frequencies known as the "700 megahertz band."
A large swath of 700-megahertz frequencies, traditionally set aside for analog TV broadcasts, will be freed up in 2009, when the country switches to all-digital TV broadcasting.
The Federal Communications Commission plans to raise billions through an auction of 700-megahertz frequencies in January. Major technology companies are expected to bid, including AT&T and Verizon Communications. Google Inc., the Internet search giant, has expressed interest in buying some frequencies and launching its own wireless communications network.
Industry analysts said AT&T's purchase gives it an early start on launching a 700-megahertz network, and predicted the company would buy still more frequencies at the upcoming auction.
"It just shows that AT&T is serious about getting into the 700-megahertz game," said Art Brodsky, spokesman for Public Knowledge, a telecommunications consumer advocacy group,
"What AT&T plans to do with the spectrum is to use it either to offer broadcast video or two-way communications," said spokesman Michael Coe. "This particular spectrum is not about adding more coverage to the AT&T network. It's about adding more depth."
About five years ago, Aloha began buying up unused 700-megahertz frequencies from private holders and the Federal Communications Commission, eventually creating the largest private holding of unused 700-megahertz frequencies. The frequencies acquired by Aloha correspond to channels 54 and 59 on analog TV sets.
Brodsky said broadcasts in the 700-megahertz band can carry data-intensive services like video and Internet service over long distances. In addition, these frequencies easily penetrate the walls of buildings. "In terms of the physical capability of the spectrum, it's the best around," Brodsky said.
Aloha Partners itself has sought to exploit the frequencies, in areas of the country where broadcast channels 54 and 59 aren't in use. It formed a subsidiary, Hiwire LLC, to offer broadband data and mobile TV services. Hiwire is currently running a pilot program in Las Vegas that delivers DVD-quality TV broadcasts to hundreds of cellphone customers. It also ran a broadband Internet trial in Phoenix that concluded this year.
But none of these 700-megahertz services can go nationwide until February 2009, when US television broadcasters will halt all analog service and go fully digital. When this happens, Americans will need either late-model TV sets with digital tuners, or set-top converters for their old analog sets.
At the same time, AT&T and other buyers of the 700-megahertz frequencies will begin rolling out new telecom services.
Phil Marshall, telecom analyst for Boston's Yankee Group, said AT&T's purchase suggests the company will be an aggressive bidder at the FCC auction. He said the Aloha Partners deal will bring in 12 megahertz of bandwidth, but AT&T will need at least another 10 megahertz to offer a full range of advanced wireless features.
"If you're to build out a broadband network you need bandwidth," Marshall said. "The bandwidth they've bought from Aloha is inadequate for that purpose."
The FCC plans to auction off several blocks of frequencies, including two 12-megahertz segments and one 6-megahertz chunk. Marshall predicted AT&T would bid for one of them.
Hiawatha Bray can be reached at bray@globe.com.
