Verizon is selling its spectrum, but is anyone buying?

[Commentary] On April 19, Verizon Wireless surprised many people by announcing that it would sell its 700MHz A-and B-block holdings if the Federal Communications Commission approves its proposed $3.9 billion purchase of SpectrumCo and Cox Communications’ Advanced Wireless Spectrum (AWS) holdings (as well as a smaller spectrum swap with Leap Wireless). This comes despite Verizon’s recent well-publicized assertions that it will start running out of LTE capacity by 2013 if it doesn’t get approval for the SpectrumCo deal. That’s led some of us to wonder whether Verizon is really as short on spectrum as it claims. However, what’s more intriguing is whether Verizon can actually pull off this sale and meet Verizon CFO Fran Shammo’s claims on its Q1 2012 results call that Verizon will be able to get a “return” on its original investment.

As Public Knowledge’s Harold Feld points out, Verizon is making as an incredibly smart move to wrong-foot both its competitors and the FCC. In as single stroke it can get its SpectrumCo transaction approved without allowing smaller competitors to close the “spectrum gap” between themselves and AT&T and Verizon. Moreover, if the FCC allows Verizon to set a reserve price on its 700 MHz licenses based on its apparent intention to make a profit over what was paid in 2008, it is possible that Verizon may be able to get its AWS while keeping many of the A-and B-block licenses it claims to be sacrificing. Verizon paid relatively high prices for those licenses in 2008, and it is far from clear whether smaller competitors are in a position to pay more for these licenses today than they were prepared to bid back in 2008.