Inside the messy world of T-Mobile’s 2.5 GHz spectrum licenses

The Christian College of Georgia was founded in 1947 in Athens, Georgia. It used to operate a college campus for students at the nearby University of Georgia who planned to enter the ministry of the “Disciples of Christ,” a Protestant denomination. However, it closed that campus in 1995. Today it offers remote courses for ordained ministry.

The Christian College of Georgia also owns a 2.5GHz spectrum license – WND620 to be exact – that covers Athens. It obtained the license in 1992 from the FCC, shortly before the agency stopped giving them to educational institutions, and now leases it to T-Mobile.

On September 30, 2021, T-Mobile offered to buy out that license (which is basically just a piece of paper) for $1 million. The offer was essentially an attempt by T-Mobile to buy out its lease on the license – to become a license owner rather than a renter.

Incredibly, that’s not the best offer the Christian College of Georgia has received for its WND620 license. T-Mobile’s $1 million represented the company’s counter to a competing offer from investment firm WCO Spectrum. WCO is headed by Gary Winnick, a financier who founded telecom giant Global Crossing. According to the Los Angeles Business Journal, Winnick is worth $2.2 billion.

In June 2021, Winnick’s WCO Spectrum offered the Christian College of Georgia a whopping $5.5 million for its 2.5GHz spectrum license, WND620. WCO’s goal was to basically become T-Mobile’s spectrum landlord, charging the operator rent for access to WND620.

Although it involves the obscure and arcane world of FCC spectrum licensing, the lopsided bidding war between T-Mobile and WCO is important because T-Mobile’s cornerstone midband 5G network is built on top of hundreds of licenses just like WND620. It’s the 5G network that T-Mobile is spending billions of dollars to build out, and it’s the network that’s at the forefront of the operator’s competitive positioning against rivals AT&T and Verizon.

And a 2019 ruling by the FCC potentially paves the way for investors like WCO to purchase such licenses right out from under T-Mobile’s nose.

TV to win the Cold War

“The history of the [2.5GHz] band is long, complex and frankly, both irrelevant and boring,” wrote the financial analysts at New Street Research in a recent note to investors.

The 2.5GHz spectrum band – dubbed Educational Broadband Service, or EBS – was first released by the FCC in the 1960s to educators. The goal was to allow universities, high schools, religious institutions and others to broadcast instructional TV programming into schools and workplaces as a way to supercharge the US educational system in the country’s Cold War with the Soviet Union.

The FCC only allowed very specific entities to hold such licenses:

• accredited public and private educational institutions;
• governmental organizations “engaged in the formal education of enrolled students;”
• and nonprofit organizations “whose purpose is educational and include providing educational and instructional television materials to accredited institutions and governmental organizations.”

Indeed, the agency has in the past cracked down on entities masquerading as educational institutions to get those licenses. For example, last year it issued a total of $47 million in fines to 10 entities it said failed to provide the educational services required to hold an EBS license.

Renting spectrum

However, the truth is that few 2.5GHz license owners actually use the licenses for their intended purpose. One 1980 study found only 82 such TV stations in operation. As a result, the FCC in 1983 allowed EBS license holders to lease out the “excess capacity” on their licenses for entertainment programming, as long as the license owners retained 5% of their spectrum for educational purposes.

And that’s exactly how the Christian College of Georgia entered the scene. In 1992, it obtained WND620 for an “instructional television fixed service” in Athens.

But, like most EBS license holders, the Christian College of Georgia quickly entered into an “excess capacity airtime lease” for some extra cash. The company’s first lease was with BellSouth Wireless Cable, which later assigned the lease to AT&T, which still later assigned it to Clearwire. In 2009, Clearwire and the Christian College of Georgia entered into a new, 30-year lease, which was part of Clearwire’s effort to build a nationwide WiMAX network on the 2.5GHz spectrum licenses it cobbled together through such leases. After it became clear that Clearwire wouldn’t be successful, it was acquired by Sprint. And then T-Mobile announced its intent to acquire Sprint in 2018.

After it finally closed its acquisition of Sprint in 2020, T-Mobile announced a five-year, $60 billion 5G network construction project centered on the 2.5GHz licenses it acquired from Sprint.

However, T-Mobile didn’t actually own those 2.5GHz licenses. It just rented them from educational institutions like the Christian College of Georgia.

But that’s changing. At roughly the same time the agency voted to approve T-Mobile’s purchase of Sprint, the FCC also issued another landmark ruling for EBS license holders. In a ruling that went into effect in 2020, the agency enabled EBS license holders like the Christian College of Georgia to simply sell their spectrum licenses to commercial entities.

The ruling paved the way for T-Mobile – and others – to become spectrum owners rather than renters.

‘Attractive stable yields’

“The partners of WCO are constructive on acquiring 5G critical spectrum licenses,” explained Carl Katerndahl, a managing partner at Gary Winnick’s WCO Spectrum, in an email to Light Reading.

Katerndahl wrote that the FCC’s rule change allowing EBS license holders to sell their licenses “created an opportunity to aggregate these licenses that provide attractive stable yields based on their long-term leases with network operators and the ability to participate in the growth and expansion of next generation technologies and future demand for network capacity.”

He continued: “What we found in pursuing the EBS licenses was a unique opportunity to deliver transparency, fairness and value to the license holders by leveling the playing field by providing them an independent, third-party buyer for their spectrum.”

WCO is not alone. For example, late last year Select Spectrum announced its Spectrum Marketplace platform, where customers can lease or purchase 2.5GHz spectrum licenses. The company is now offering dozens of 2.5GHz licenses covering locations from the West Coast to the East Coast.

To read the complete article, visit Light Reading.