big plans

Japan’s Softbank wants Sprint because it could be the key to high-speed mobile domination

Apple fans outside a Softbank store in Tokyo. Softbank was the first carrier to bring the iPhone to Japan, and has a history of reinventing itself in order to get ahead of trends in technology. AP/Itsuo Inouye

Japan’s third largest mobile carrier, Softbank, is in talks to acquire 70% of Sprint, the third largest mobile carrier in the US. (Update: Softbank’s shares fell sharply on the news when the Tokyo stock exchange opened on Oct. 12, over doubts that it can afford the purchase.) It appears to be a land-grab. Or more accurately, a spectrum grab. Sprint owns nearly half of a company called Clearwire, which owns the rights to spectrum in the US that could be used for a next-generation high speed wireless network that doesn’t exist yet.

In case you’re not up on your US telecom lingo, here’s why spectrum matters: Broadcasting at whatever frequency you like would lead to all kinds of interference and no wireless signal would ever get through. That’s why the US Federal Communications Commission, and its equivalent in every other country on the planet, periodically auctions off portions of the electromagnetic spectrum. Whoever gets the rights to this spectrum can do with it as they see fit.

And what Clearwire wants to do with its chunk of spectrum is build out a kind of high-speed wireless network (called TDD LTE) that isn’t accessible by any mobile device in the US–yet. But once Clearwire/Sprint are finished building this network, it happens that it will cover the same range as spectrum already owned in Japan by none other than Softbank.

(Even though Sprint doesn’t have a controlling interest in Clearwire, it appears that Softbank’s acquisition of Sprint may be contingent on a takeover of Clearwire, which has sent Clearwire’s stock up 50% in recent trading.)

As the third-largest carriers in each of their countries, Sprint and Softbank may not have the clout individually to persuade a top-rank phone manufacturer—Apple, say—to build them a phone specially designed for TDD LTE. But after joining forces, they might, giving them the leverage to buy handsets from manufacturers that could access the internet at what Sprint has hinted are speeds that no other carrier could match. (If Sprint/Clearwire had a lock on the spectrum required to make TDD-LTE work, the mechanics of this technology suggest this would be a not-unreasonable claim.)

This wouldn’t just be about having better technology. As Verizon’s and AT&T’s next-generation LTE networks fill up with iPhone 5s and the latest Android phones, that crowding will inevitably slow down the rates at which customers can access the internet. (If you’ve ever compared the performance of your phone in Manhattan or San Francisco to its performance outside those cities, you’ve experienced this first-hand.)

Softbank was the first carrier to bring the iPhone to Japan, so it has a history of betting on whatever’s next in mobile. The long game here is that mobile is taking over everything, and he who controls access to enough spectrum to provide high-speed internet service anytime, anywhere controls the universe.

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