Under pressure to offer better wireless service for iPhone customers, among others, AT&T has invested $1.925 billion to acquire Qualcomm's spectrum licenses in the lower 700-MHz frequency band.

AT&T expects the move to help the company provide an advanced 4G mobile broadband experience in the coming years. But could it ward off Verizon Wireless as rumors continue swirling that the carrier will pick up the iPhone in the first quarter of 2011?

"With the fact that the Qualcomm spectrum includes significant assets in New York, Boston, Philadelphia, Los Angeles, and San Francisco -- the first and last of which have been particularly sore spots for iPhone users -- you can see the strategy behind the deal," said Charles King, principal analyst at Pund-IT.

"But it isn't just the iPhone -- the continuing success of the iPad and the likely emergence of other 3G- and 4G-enabled tablets will put additional strain on wireless networks," he added. "Buying existing spectrum from Qualcomm, while expensive, should help AT&T become more quickly competitive with Verizon and other vendors."

Discontinuing FLO TV

Qualcomm uses the licenses to support the service business of its FLO TV subsidiary. The sale follows Qualcomm's previously announced plan to evaluate strategic options for FLO TV. Qualcomm expects the FLO TV business and network will be shut down in March 2011.

The spectrum covers more than 300 million people nationwide. Twelve MHz of Lower 700-MHz D and E block spectrum covers more than 70 million people in five of the top 15 U.S. metropolitan areas: New York, Boston, Philadelphia, Los Angeles, and San Francisco. And six MHz of D block spectrum covers more than 230 million people across the rest of the U.S.

As part of its longer-term 4G network plans, AT&T said it plans to deploy the spectrum as supplemental downlink, using carrier-aggregation technology. This technology works to offer substantial capacity gains and will be activated when AT&T completes the next iteration of its network. AT&T said it plans to begin deploying the spectrum once compatible handsets and network equipment are developed.

Investing in Multicast Technologies

Qualcomm intends to integrate carrier-aggregation technology into its chipset road map to enable a supplemental downlink to address increased consumer demand for rich mobile-media content. AT&T expects to deploy this technology to deliver a stronger mobile broadband experience -- now and in the future.

"This is a positive outcome for Qualcomm and our stakeholders," said Paul Jacobs, chairman and CEO of Qualcomm. "Carrier aggregation, supplemental downlink, and LTE multicast technologies are an exciting evolution of next-generation wireless systems to economically support increasing consumer demand for mobile TV and other rich-media content. We will continue to drive the development and delivery of these new capabilities, which build on our technology leadership and deep experience with 3G, 4G and broadcast technologies."