Today’s offer by Altice SA to spent $11 billion to acquire France’s Bouygues Telecom and combine it with Altice-owned Numericable-SFR to create France’s largest wireless operator is not playing well in some quarters of the French government.

Patrick Drahi’s announcement he was borrowing the money to finance the deal worried France’s economy minister Emmanuel Macron, who felt Drahi’s leverage game in the mergers and acquisitions business came with a massive debt load that could have major implications on French taxpayers.

“I don’t want to create a too-big-to-fail player with such a leverage and it’s my role to … deliver such a message,” Macron said. ”If the biggest telecom operator blows up, guess what, who will pay for that? The government, which means the citizens.”

Macron is partly referring to the upcoming French wireless spectrum auction that will make more wireless frequencies available to the wireless industry. The proceeds will be paid to the French government and a default by Altice could have major implications.

Macron

Macron, himself a one-time investment banker at the Rothschild Group, said he was not fooled for a moment by Drahi’s claims the merger would benefit French consumers, especially at the overvalued price Drahi was willing to pay. Macron estimates Drahi has offered almost double the total market value of Bouygues Telecom, a conglomerate that also includes road construction and maintenance, commercial construction and television businesses — all elements Drahi would likely discard after the merger.

“All the synergies which could justify such a price are in fact about killing jobs,” Mr. Macron said. “At the end of the day, is it good for the economy? The answer is ‘no’.”

The merger deal is probably not good news for consumers either. France’s ongoing wireless price war among the four current competitors has reduced the cost of wireless service to as little as $3 a month since low-cost player Iliad broke into the French mobile market three years ago.

Virtually every French telecom analyst predicted the merger would be the beginning of the end of France’s cheap wireless service. Investors cheered the news, predicting higher priced wireless service would boost the value of their stock and increase profitability, while reducing costs. The deal’s defenders said ending the price war would attract necessary investments to upgrade French wireless networks and limit the impact of a bidding war for new wireless spectrum.

Drahi’s style of indebting Altice while slashing expenses at acquired companies has earned him suspicion from French officials.

Drahi’s style of doing business again raised concerns among several members of the French government. Drahi is notorious for severely slashing expenses at the companies he acquires, usually firing large numbers of middle managers and “redundant employees” and alienating those that remain.

But vendors complain they are treated even worse than Drahi’s employees. Electricity has been cut at Drahi-owned facilities for non-payment, employees have been expected to bring their own toilet paper to the office, and copying machines have been known to run out of toner and paper after office supply firms went unpaid for months.

After his $23 billion acquisition of SFR, the country’s second largest mobile operator, Drahi ordered SFR to stop paying suppliers’ outstanding invoices until vendors and suppliers agreed to massive discounts of as much as 80% on current and future invoices. A government mediator was forced to intervene.

Macron doubts Drahi has the interest or the financial resources to invest in Bouygues’ telecom business. Drahi has already indebted Altice with a spending spree of more than $40 billion over the last year acquiring Suddenlink Communications, SFR, and Portugal Telecom.

Drahi’s acquisition machine is fueled by “cheap debt” available from investment bankers looking for deals to meet investors’ demands for better yields from corporate bonds. Safer investments have faltered as interest rates have fallen into negative territory in parts of Europe.

French lawmakers, particularly those aligned with France’s labor unions, accuse Drahi of acting like a bulimic debtor and feared his splurge would eventually lead to a banker-forced purge and government bailout if he cannot meet his debt obligations in the future.

“If I stop my so-called bulimic development, I won’t have any debt five years from now. That’s idiotic, I won’t have any growth for five years,” Drahi curtly replied. “I think it’s better to continue to produce growth all while keeping a foot close to the brakes and looking in the rear-view mirror.”

Finance Minister Michel Sapin scoffed at the apparent recklessness of America’s J.P. Morgan and France’s BNP Paribas investment banks who readily agreed to offer financing for the deal, despite Drahi’s existing debt.

“We must be careful not to base an empire on the sands of debt,” he warned.

[flv]http://www.phillipdampier.com/video/Reuters French government hardens stance on Altice bid for Bouygues Telecom 6-22-15.flv[/flv]

Reuters reports Altice may be vastly overpaying for Bouygues Telecom and that has the French government concerned about creating a “too big to fail” telecom operator in France. (2:04)

With billions of dollars in new revenue and royalties to be made, Qualcomm and some members of the wireless industry are pushing regulators to quickly approve a new version of LTE wireless technology that will share many of the same frequencies used by home and business Wi-Fi networks, creating the potential for speed-killing interference.

Wireless operators believe LTE-Unlicensed (LTE-U) could be used to offload much of the growing wireless data traffic off traditional 4G LTE wireless data networks. With the cost of securing more wireless spectrum from regulators growing, LTE-U technology would allow operators like AT&T, Verizon, Sprint and T-Mobile to use the U-NII-1 (5150-5250MHz) and U-NII-3 (5725-5850MHz) unlicensed bands currently used for Wi-Fi to deliver high-speed wireless broadband traffic to their customers.

Qualcomm and Ericsson, behind the newest iteration of LTE, have a vested interest promoting it as the ideal choice for metrocell, indoor enterprise, and residential small cell applications. Every manufacturer incorporating LTE-U technology into everything from carrier-owned microcells to smartphones will owe royalty payments to both companies. With billions at stake, Qualcomm is doing everything possible to tamp down fears LTE-U signals will create harmful interference to Wi-Fi signals.

[flv]http://www.phillipdampier.com/video/CES2015 Qualcomm Demonstrates LTE-U 1-2015.mp4[/flv]

At the Consumer Electronics Show in Las Vegas held in January, a Qualcomm representative went as far as suggesting LTE-U will improve home Wi-Fi service. (5:42)

RCRWireless News:

[Qualcomm] set up a screened room with eight pairs of access points occupying the same channel and added Wi-Fi access-point terminals in one room and LTE-U terminals in another. The results show the average throughput of 3.3Mbps with Wi-Fi alone more than doubled to 6.7Mbps when the LTE-U access point was introduced.

In another test to show that LTE-U is a better neighbor to Wi-Fi than Wi-Fi itself, they took eight Wi-Fi nodes and replaced four of them with LTE-U nodes, the result of which showed a 1.9Mbps increase in average Wi-Fi throughput. In almost every test, the LTE-U enhanced network outperformed traditional Wi-Fi.

Burstein

Industry observer Dave Burstein is concerned advocates of LTE-U are trying to rush approval of the technology without verifying Qualcomm’s non-interference claims.

“The telcos are considering 40 and 80MHz channels that could easily swallow half of more of the Wi-Fi spectrum,” Burstein writes in response to an EE Times article about the technology. “If Wi-Fi is important, that’s a mistake to allow. Advocates are trying to rush it through even though there is not a single independent test or field trial.”

Qualcomm dismisses the interference complaints pointing to its own research showing the two standards can co-exist adequately. But multi-billion dollar wireless companies with nationwide Wi-Fi networks at stake are far less confident. In fact, LTE-U has already divided the two largest wireless carriers in the United States. Verizon Wireless is an original proponent of LTE-U while AT&T has expressed “concern,” a polite way of saying it isn’t happy. What separates AT&T and Verizon Wireless? AT&T has invested in a nationwide network of more than 34,000 Wi-Fi hotspots. Verizon offers just over 5,000, most for FiOS customers or those in especially high traffic venues.

A Stanford University professor with no ties to Qualcomm or the wireless industry privately shared his belief allowing 5GHz Wi-Fi signals to commingle with LTE-U is going to cause problems.

The development of “Wild West” Wi-Fi has always tracked differently than the licensed cellular/wireless business. Over more than a decade, evolving Wi-Fi standards have come to expect interference from other nearby Wi-Fi signals. In a densely packed city, more than two dozen Wi-Fi signals can easily be found all competing for their own space across the old 2.4GHz and newer 5GHz unlicensed bands.

Wi-Fi proponents credit its robustness to its “politeness protocol.” Before a wireless router or home hotspot fires up its Wi-Fi signal, it performs several tests to check for other users and constantly adjusts performance by backing off when it discovers interference from other signals. That is why a user can receive strong Wi-Fi signals but still endure reduced performance, as the hotspot accommodates nearby hotspots and other traffic.

It works reasonably well, according to Rupert Baines, a consultant at Real Wireless.

“But [Wi-Fi signals] are delicate, and they rely on implicit assumptions that there aren’t other things there (or aren’t too many),” Baines told EE Times. “In effect, they behave as though the unlicensed band were not technology neutral but were Wi-Fi only.”

The intrusion of LTE-U changes everything.

[flv]http://www.phillipdampier.com/video/Wireless Week Tuesdays with Roger LTE-Us Gain is Wi-Fis Loss 3-24-15.flv[/flv]

On the March 24, 2015 episode of Tuesdays with Roger, Recon Analytics’ founder Roger Entner talks with Wireless Week about the questions raised as major carriers, including T-Mobile and Verizon Wireless, plan to launch LTE into unlicensed territory. Concerns abound, particularly for consumers and companies who rely on Wi-Fi and don’t want licensed use in unlicensed bands to interrupt that service. (7:31)

Change in and of itself is not necessarily a bad thing, especially if LTE-U is superior to Wi-Fi, and some proponents suggest it is. Jag Bolaria, an analyst at The Linley Group, argues LTE better manages data/call handoff better than Wi-Fi access points can. LTE is also a more efficient spectrum user than Wi-Fi.

Last week, South Korea’s LG U+ demonstrated LTE-U was capable of 600Mbps speed, eight times faster than traditional LTE. But to accomplish that level of speed, LG U+ had to occupy 60MHz of bandwidth in the 5.8GHz band and allocate an extra 20MHz from its traditional LTE service. The company plans to further expand its use of South Korea’s 5.8GHz unlicensed band by occupying 80MHz of it to further boost speeds to 750Mbps. But the company did not say how the tests affected others sharing the same frequencies.

If LTE-U is superior, then why not gradually move every user towards the technology and away from Wi-Fi?

Aptilo Networks AB CEO Torbjorn Ward answers LTE-U is a solution in search of a problem.

“I think LTE on unlicensed sounds like a good idea if it wasn’t for the fact that there are four billion devices on Wi-Fi out there,” he told Light Reading, noting that 802.11ac can already run at 100Mbps, so there’s little need for the LTE boost. “I think when it comes to unlicensed, you can do a longer range with LTE, but I don’t see the full benefit.”

That does not seem to matter to LTE-U’s developers or cell phone companies that lack robust Wi-Fi networks of their own.

In the original Qualcomm/Ericsson proposal, both companies promote the fact they could launch LTE-U in the unlicensed Wi-Fi bands “as-is.” That is a big problem for AT&T and other Wi-Fi users because LTE-U evidently employs few, if any protection protocols in its initial specifications for other traffic. Verizon Wireless is reportedly lobbying against the development of interference protection protocols and has publicly asserted its interest in deploying LTE-U regardless of other users.

“In [the] USA, there are no requirements for unlicensed deployment that require changes to LTE air interface,” Verizon stated in its proposal: “New Band for LTE deployment as Supplemental Downlink in unlicensed 5.8GHz in USA.”

LTE-Unlicensed has been characterized as “rude” for not avoiding interference to other users.

Clint W. Brown, business development director of mobility wireless connectivity at Broadcom, and a vice-chairman of the Wi-Fi Alliance counters it is premature to approve LTE-U in the unlicensed Wi-Fi band without more testing and information about its interference protocols.

“We’ve heard about the tests they’ve done, but it’s not factual,” Brown told EE Times. We haven’t seen the data and we don’t know how the tests were set up. First, I’d like to see if [LTE-U] can detect low-level signals. Second, I want to make sure it features a ‘Listen before Talk’ decision process so that LTE-U will wait for an opening rather than barging into the conversation already taking place in the unlicensed spectrum. Third, there should be a back-off mechanism, when it sees a collision. “We aren’t aware of any publicly available documents explicitly stating those attributes.”

The Federal Communications Commission has also now taken an interest and issued a public notice asking stakeholders and consumers to share their thoughts on LTE-U and a companion technology known as Licensed Assisted Access (LAA) that would hand off data sessions between a wireless carrier’s traditional 4G LTE network and LTE-U.

The makes the discussion political as well as technical. The FCC traditionally permits industry groups to define standards, but Republican Commissioner Mike O’Rielly now worries the FCC might butt into that process.

“The decision to jump into this space rather casually causes me great concern,” O’Rielly said. “In particular, any step that could insert the commission into the standards work for LTE-U comes with great risk. I will be vigilant in ensuring that the commission’s involvement does not result in taking sides with various stakeholders, hindering technological innovation, or having any say about what technologies should or should not be deployed.”

For the moment, O’Rielly’s concerns about the FCC are premature as long as a division exists over LTE-U among many of the industry players:

• Companies FOR LTE-U: Verizon, China Mobile, Qualcomm, Ericsson, NTT DoCoMo, T-Mobile USA, Deutsche Telekom, TeliaSonera, and China Unicom.  Equipment manufacturers also in support: Nokia, NSN, Alcatel-Lucent, LG, Huawei, ZTE, Hitachi, Panasonic, and others;
• Companies AGAINST LTE-U (as now defined): Orange, Telefónica, Vodafone, AT&T, Sprint, SouthernLINC, US Cellular, DISH and a handful of vendors.

Burstein also uncovered evidence the wireless industry may be stacking the deck against increased competition and consumers. He found 11 of the world’s largest wireless companies (including AT&T, T-Mobile, and Sprint) quietly colluding on a proposal that would block anyone other than currently licensed LTE users from being able to use LTE-U on a standalone basis. The opaquely-titled proposal, “Precluding standalone access of LTE on unlicensed carriers,” is at least frank about its reasoning: “Standalone deployment in unlicensed spectrum implies drastically different business models from nowadays and might impact the value chain.”

In other words, if consumers are able to get savings from LTE-U using a new generation of non-traditional providers like Republic Wireless or Cablevision’s Freewheel that do not depend primarily on cellular networks, it could cost those 11 traditional wireless companies billions in lost revenue. To stop that, the companies propose requiring a special LAA “guard signal” to stop standalone access of LTE-U. Since only licensed cell phone companies have access to those frequencies, it automatically locks out new upstarts that lack mobile spectrum of their own.

Sneaky insertions like that may be exactly why the Obama Administration’s FCC is being more activist about monitoring the wireless industry, potentially cutting off anti-competitive proposals before they can become adopted as part of a formal technical standard.

[flv]http://www.phillipdampier.com/video/Fairness to Wi-Fi and LTE unlicensed 5-8-2015.mp4[/flv]

RCRWireless News gets deep into the development of LTE-Unlicensed and how it will impact cellular infrastructure, Wi-Fi and small cells. (25:39)

The national map of available white space channels show plenty are available in rural areas, but designing an urban network might prove challenging because open channels often just don’t exist. In a medium-sized city like Rochester, only 11 UHF channels are available, a number likely to dwindle to close to zero if the FCC successfully reallocates much of the UHF band to wireless providers like AT&T and Verizon.

A dozen homes in the middle of the Adirondacks now have access to Internet speeds far faster than what Verizon and Frontier DSL can deliver and without the usage caps or speed throttling common with satellite Internet access.

Thurman, N.Y.’s public-private “white space” wireless network survived months of political wrangling, debate, and even intentional signal interference created by someone intent on disrupting the project. For a community that some maps depict with zero residents, the 1,200 people of Thurman are now more known than ever, winning national attention for one of the first next generation rural wireless networks to use unused space on the UHF dial to provide Internet access.

A dozen homes are the first to receive the service, with nearly 80 more on the way during phase one of the project. A $200,000 New York state broadband grant helped get the project off the ground and defray the cost of equipment installed in each subscriber’s home. But the initial cost isn’t cheap, even with the grant. New customers pay an upfront equipment fee of $292 for a receiver that costs the project up to $600. The monthly service charge is $50. Despite the price, it’s worth it to a lot of subscribers.

“The white space service is truly amazing,” said John Schroeter of Kenyontown, noting he uses the Internet for genealogical research and relied on dial-up access for the last 15 years. “I can go from one web page to another without waiting forever.”

Schroeter told Denton Publications that web pages often failed to load with dial-up, even after hours of waiting. Now he can manage to complete days of research in about an hour, without having to drive 15 miles to the nearest Wi-Fi hotspot.

Despite the fact Verizon and Frontier Communications both run their own fiber cables on the same utility poles in the region, at least 75% of the 400 homes in Thurman have no access to broadband Internet, living out of reach of even basic DSL. Many end up in the parking lot of the town hall to use Wi-Fi. Others depend on prohibitively expensive satellite access. None of the existing options were ideal. Sheila Flanagan, proprietor of Nettle Meadow Farm complained it took her hours to prepare even a small number of shipping labels to send her cheese products across the country with UPS. Speeds were so slow, she was forced to drop Williams-Sonoma as a client.

The concept of white space wireless Internet access has already taken hold in Europe but has dragged in the United States as existing UHF television stations, wireless carriers, wireless microphone manufacturers and others who use the same frequencies white space data services also depend on defend their turf. Since white space services are unlicensed and intended for two-way communications, fears that Internet users would degrade wireless microphones or TV reception meant special care had to be taken to lower the potential for interference.

Since rural areas lack a crowded television dial, are often outside of the coverage areas of wireless carriers, and are unlikely to host many wireless mics, white space broadband would seem like the natural solution.

The project in Thurman faced a number of obstacles to overcome anyway. There were philosophical objections from tea party conservatives who objected to tax dollars paying for the “luxury” of Internet access when satellite service is available. Some residents wanted a fiber to the home solution, one that was likely financially out of reach for the small community. Still others wanted the money spent on a fiber link between the town and Time Warner Cable, that might then be enticed to wire homes in the rural community. In the end, the community decided to go ahead with an advanced wireless network, citing a number of factors familiar to many living in rural areas:

1. Since the town is located entirely within the Adirondack Park, there are prohibitions on placing communications towers on nearby peaks or other high spots that could spoil the view;
2. The heavily forested and mountainous area made a traditional Wireless ISP project difficult because those networks need line of sight communications. White space wireless signals easily penetrate through trees and can stay intact across hilly terrain;
3. Although not as bandwidth capable as fiber optics, white space networks are capable of delivering 10Mbps broadband per UHF channel. Most networks bond multiple UHF channels together to support even faster speeds and expand capacity;
4. The chances of creating interference for other spectrum users was low in Thurman, which is a four-hour drive from New York and far enough north of Albany to avoid interfering with signals from the state capital. Even wireless carriers hug their cell towers along I-87, a respectable distance away;
5. The network has redundant backhaul access to fiber from both Verizon and Frontier, neither of which show the slightest interest in expanding services into the community on their own;
6. The grant was limited in scope and white space broadband qualified so it proved the most economical choice for a community that was no stranger to fights over money, engaging in political battles over issues like the cost of building a salt shed and auditing the on-hand count of trash bags.

The Thurman white space broadband project hides base station antennas in the tree canopy.

Tests provided the project managers with an idea where to place needed wireless antennas, often hidden within tree canopies. But at least one disgruntled resident made a point of creating intentional interference on the channels the project managers were testing, committing a federal offense along the way. That was quickly overcome and the equipment has been placed and will soon be joined by installations in nearby neighborhoods, broadening the reach of the service.

Recent advancements in white space technology have also allowed speed and capacity to improve dramatically. Equipment now transmits its exact GPS-identified location to a national database which sends back an authorized list of “white space” channels each transmitter can use to provide the service. If a new licensed broadcaster takes to the airwaves, a database update will lock out that channel in the area, preventing interference.

Although exact speed data was not available at press time, Sally Feihel demonstrated she could successfully stream an episode of a classic Andy Griffith Show on her iPod at the same time a videoconference was underway and someone else was downloading a movie, all without skipping a beat. In fact, there is so much speed and capacity built into the system, its managers say speed throttles and usage caps are completely unnecessary.

Most users agreed the wireless network far outpaced satellite and DSL and some believed it was even faster than Time Warner Cable Internet access they experienced elsewhere. (Time Warner Cable doesn’t come near the community today.)

Constructing the network only took several months, but the politics that often surrounds public-private initiatives and the need for grant funding in income-challenged rural America can tie up projects much longer than that. The need for decent and affordable Internet access often will cross party lines, especially in rural communities.

New York’s state broadband expansion fund could help expand similar projects to other bypassed areas of the state. That investment may actually save taxpayers from paying high broadband bills indefinitely.

Residents are eagerly waiting for the next expansion to begin down Valley, Garnet Lake and Glen-Athol Roads. Moving beyond that may take more grant funding.

“White space is saving us $90 per month, and it’s far faster than satellite ever was,” another resident said.

[flv]http://www.phillipdampier.com/video/MetroFocus A New way to Bring Broadband to Rural Towns in Upstate New York 2014.mp4[/flv]

MetroFocus showed the initial planning and testing phases of Thurman’s new white space wireless network, including interviews with town officials and a tour of the community. (4:23)

[flv]http://www.phillipdampier.com/video/Dynamic Spectrum in Action How TV White Space Devices Work.mp4[/flv]

TV white space wireless broadband networks are designed to avoid interference with other licensed spectrum users. See how the technology works in this short video. (2:27)

Verizon’s FiOS expansion is still dead.

Verizon Communications does not see its remaining landline customers as part of the company’s future growth and customers should not be surprised if Verizon sells more of its legacy network to other telephone companies including Frontier, Windstream, and CenturyLink.

Speaking at the Morgan Stanley Technology, Media and Telecom Conference 2015 on March 2, Verizon chief financial officer Fran Shammo made it clear to investors Verizon will dump “non-core” assets that do not align with the company’s future long-term growth strategy, even in areas where FiOS predominates.

Shammo told investors Verizon’s growth strategy is predicated on Verizon Wireless, which will continue to get most of the company’s attention and future investment.

“It’s all around the wireless network and I’ve consistently said before, you should anticipate that wireless CapEx continues to trend up while wireline continues to trend down,” Shammo said.

The bulk of Verizon’s investments in its wired network are being made in areas that are already designated as FiOS fiber to the home service areas. Shammo explained that the company is required to invest in FiOS expansion to comply with agreements signed in cities like New York and Philadelphia to make the service widely available in those communities. Beyond those commitments, Shammo signaled the company isn’t planning any significant new spending to upgrade the rest of its legacy copper network.

“We continue to invest in those things that we believe are the future growth of the company,” Shammo said, and anything involving its wired networks outside of Verizon’s core FiOS service area in the northeast and Mid-Atlantic states probably doesn’t qualify.

What will happen in Verizon service areas that are not considered priorities?

“For the right price and right terms, if there’s an asset we don’t believe is strategic to Verizon and can return shareholder value, we’ll dispose of that asset,” Shammo said.

An example of that strategy was Verizon’s sudden announcement in February it would sell its wireline assets in Florida, California, and Texas to Frontier Communications for $10.54 billion. Although a significant part of those service areas are served by FiOS after Verizon invested more than $7 billion on upgrades, Verizon still plans to abandon customers and walk away from that investment because it is not part of Verizon’s future growth strategy.

“If you look at Florida, Texas, and California, these are three island properties,” Shammo told investors. “FiOS is a very small footprint of those properties compared to the copper [except in] Florida because it was just Tampa. But you look at that and you say strategically there’s really not much we can do with those properties because they are islands.”

Verizon will spend the proceeds from its latest landline sale on the wireless spectrum it just acquired and will pay down some of the debt incurred after buying out Vodafone’s former ownership stake in Verizon Wireless. The company has also undertaken a massive share repurchase program, planning to buy back 100 million shares by 2017 to help its shareholders. To ease investor concerns about some of Verizon’s latest strategic moves, it also announced plans to buy back an extra $5 billion worth of shares in the second quarter of this year.

A close review of the latest Verizon sale to Frontier shows the extent Verizon believes in its wireless business at the cost of its legacy copper and FiOS networks. That comes as no surprise to Verizon observers who note its current CEO used to run Verizon Wireless.

Shammo, as featured on a recent cover of CFO Studio magazine.

“It’s been clear for years that Verizon has wanted out of the copper business,” said Doug Dawson from CCG Consulting. “They first sold off large portions of New England to Fairpoint. Then in 2010 they sold a huge swath of lines in fourteen states to Frontier including the whole state of West Virginia. And now comes this sale. It’s starting to look like Verizon doesn’t want to be in the landline business at all, perhaps not even in the fiber business.”

Verizon’s latest sale involves “higher margin properties than the rest of our wireline business,” Shammo said, in part because large parts of the urban service areas involved were previously upgraded to FiOS.

“So if you look at Dallas, we were over 50% penetrated both in TV and broadband,” said Shammo. “So, it was a very highly penetrated market that was delivering a lot of cash flow and delivering a lot of earnings. So by just divesting of the three properties, if you just did it on an apples-to-apples basis, there would be dilution.

Giving up that amount of cash flow — needed to win back the $7 billion in FiOS upgrade investments Verizon made in the three states — would normally concern investors worried about the “stranded costs” left over from investments that were never fully repaid. But Verizon has a plan for that: an “Involuntary Separation Plan” (ISP) for more than 2,000 Verizon employees, a polite way to describe job-cutting layoffs.

“We have a year to plan for this and the plan is similar to what we did with the last time we rolled properties out from Frontier,” Shammo said. “We will plan to offset the stranded cost and those plans are already being worked. You saw a little bit of that in the fourth quarter where we gave some ISPs to the represented employee base and we had 2,100 people come off payroll.”

Verizon’s growing preoccupation with Verizon Wireless leaves some analysts questioning the company’s wisdom giving up high-profit FiOS broadband in favor of wireless at a time when competition among wireless companies is finally emerging.

“Verizon reports an overall 41% market penetration for its data product on FiOS networks,” said Dawson. “Data has such a high profit margin that it’s hard to think that FiOS is not extremely profitable for them. The trend has been for the amount of data used by households to double every three years, and one doesn’t have to project that trend forward very far to see that future bandwidth needs are only going to be met by fiber or by significantly upgraded cable networks.”

Considering the wireless market is maturing and most everyone who wants a cell phone already has one, there are questions about where Verizon sees future growth in a business where it is getting harder to attract new customers.

“Verizon was a market leader getting into the fiber business. FiOS was a bold move at the time,” Dawson reflects. “It’s another bold move to essentially walk away from the fiber business and concentrate on wireless. They obviously think that wireless has a better future than wireline. But since they are already at the top of pile in cellular one has to wonder where they see future growth?”

A Verizon executive told investors there is no wireless spectrum shortage in the United States and Verizon has historically purchased and warehoused spectrum it had no intention of using immediately.

Fran Shammo, chief financial officer of Verizon Communications, drew attention to Verizon’s controversial spectrum acquisition policy as part of a conversation with investors about the recent FCC auction that sold 65 megahertz of wireless frequencies for an unprecedented $44.9 billion, far and away the highest ever seen in a spectrum auction.

“In every purchase of spectrum up to this auction, the scale was that it was more efficient to buy spectrum than it was to build capacity because the scale was spectrum was cheaper to build on capacity,” Shammo said.

Before the auction, there were significant differences in Verizon Wireless’ network capacity in different cities. In New York City, Verizon controls 127MHz. In Los Angeles and San Francisco it manages with 107MHz, but only has 97MHz to work with in Philadelphia, San Diego and Chicago.

Verizon Wireless has always held spectrum it acquired at auction but never put into widespread use on its network. But bidding during the FCC’s most recent Auction 97 made bidding and warehousing unused frequencies an expensive proposition, more expensive than beefing up Verizon’s existing network with additional cell towers, microcells, and other technology to make the most use of existing spectrum assets.

“This auction flipped [our acquisition] equation in certain markets,” Shammo said in reference to Verizon’s bidding strategy. “And so we became much more diligent on what markets we strategically wanted and [which] we were willing to let go because when you looked at it, if I was to get what I wanted initially when I went in, I would have spent an extra $6 billion when I could create the same capacity with $1.5 billion by building it.”

In the most recent auction, Verizon Wireless considered spectrum acquisitions crucial in California, where it added frequencies in Los Angeles, San Diego and San Francisco. But Verizon gave up bidding on spectrum for densely populated New York and Boston where the asking price grew too high. That forces Verizon Wireless to increase the efficiency of its existing network in those cities. It will do so by deploying more cell towers to divide the traffic load, as well as adding microcells and other small-area solutions in high traffic urban areas.

Despite not getting everything it wanted, Verizon took the auction results in stride, claiming its network was fully capable of handling growing traffic loads even in areas where it failed to win new spectrum.

“People think that spectrum is the Holy Grail and if you don’t have enough spectrum, you can’t have the capacity,” Shammo said. “But actually that’s not true now because technology has changed so much. If you look at small cell technology, diversified antenna systems, and when you think [about] Chicago, if you walk down the street, you see small cells on lamp posts. So, the municipalities are starting to open up to that small cell technology.”

AT&T paid $18.2 billion for nearly 250 licenses, compared with $10.4 billion Verizon will spend on 181 licenses. The presence of Dish Networks in the bidding clearly irritated AT&T and Verizon, primarily because the satellite dish provider incorporated two “designated entities” — SNR Wireless LicenseCo and Northstar Wireless — as bidding partners, winning up to 25% off their bids as part of a “small business discount.” The two DEs won over $13 billion in licenses with $3 billion in savings.

AT&T accused Dish of circumventing auction activity rules and distorting the bidding.

“As a result, Dish the corporate entity won no licenses,” said Joan Marsh, AT&T’s vice president of federal regulatory matters. “The Dish DEs, who each enjoyed a 25% discount, won substantial allocations.”

Marsh complained Dish already controls around 81MHz of spectrum that remains unused for wireless telecom services.

Dish also made life difficult for large carriers who have learned to predict the likely bidding strategies of their competitors based on experience. Many were surprised Dish managed to both bid up prices and win a substantial percentage of spectrum, all for a wireless business it has yet to build.

T-Mobile was not happy either. CEO John Legere called the auction “a disaster for American wireless consumers.” T-Mobile suffered considerably in the auction, outspent by Dish & Friends 132 times for important wireless licenses.

“Three companies alone spent an insane $42 billion between them, grabbing a ridiculous 94 percent of the spectrum sold at this auction,” Legere wrote, referring to AT&T, Dish Network and Verizon Wireless. “This whole thing should scare the hell out of you and every other wireless consumer in the U.S., because there is another important auction next year, and the results have to be different if wireless competition is going to survive.”

With the auction over, Verizon Wireless will continue to shift its spectrum usage around to accommodate network changes. Verizon will continue to emphasize enlarging 4G LTE services while gradually reducing the percentage of its network used for other purposes. Verizon expects to shut off its CDMA voice network in the early 2020s and is reducing the amount of spectrum dedicated to supporting its legacy 3G network.