U.S. mobile operators are stockpiling various kinds of spectrum as they prepare to commercially deploy services and technologies. And those different frequencies will play an important role in just how they roll out next-generation offerings.

T-Mobile surprised some industry insiders earlier this month when it announced plans to put some of its new 600 MHz airwaves to work using 5G. T-Mobile was the top bidder in the FCC’s recent auction of the low-band airwaves, of course, agreeing to spend nearly $8 billion.

The operator said it will deploy on all its spectrum bands, including its 28 GHz and 39 GHz holdings. Still, the strategy contrasts with those of Verizon and AT&T, both of which are looking to deploy fixed wireless services in advance of mobile 5G, focusing on high-band spectrum that offers increased capacity and speed but doesn’t propagate as well.

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The trade-off between capacity and propagation

“The duopoly’s 5G strategy is basically a series of hotspots," T-Mobile John Legere said in a video announcement. “That’s no solution for mobile 5G coverage, or coverage anywhere outside a small area downtown.”

Those strategic differences underscore how the evolution to 5G will be much more incremental than previous generational transitions. T-Mobile appears to be prioritizing 5G coverage over data speed, Jan Dawson of Jackdaw Research wrote, which could enable it to deploy next-generation services ahead of its rivals. But that rollout likely won’t provide “the dramatic generational leap in performance” that is typically seen during a leap from one network generation to the next.

“T-Mobile will get some of the other benefits of 5G, even if it won’t get the speed, however,” Dawson wrote. “One of the major benefits of 5G is the ability to have a single network perform in different ways optimized for various classes of devices. That means it can provide both higher-speed service to smartphones while also operating in a very efficient way for Internet of Things devices, which in turn will be able to last for years on a single battery.”

The ever-increasing value of high-band spectrum

The battle for higher frequencies is driving up the value of some of those airwaves significantly. Verizon—which, notably, sat out of the incentive auction—last week agreed to pay roughly $3.1 billion in an all-stock transaction for Straight Path Communication, ending a dramatic bidding war with AT&T. AT&T initially bid $1.6 billion for Straight Path, which holds an average of 620 MHz in the top 30 U.S. markets and covers the entire nation with 39 GHz spectrum as well as 28 GHz spectrum licenses.

The move was just the latest in a flurry of high-band deals over the last several months: For instance, Verizon said earlier this year that it had closed on its acquisition of XO Communications, winning the right to lease XO’s 102 LMDS licenses in the 28 GHz and 39 GHz bands. That same day, AT&T quietly acquired a company called FiberTower in a move that will give AT&T spectrum in the 24 GHz and 39 GHz bands covering 8.4 billion MHz POPs, according to Wells Fargo and AllNet Insights. That market is likely to stay hot, as evidenced in part by news that Globalstar has begun shopping itself around.

“The Straight Path acquisition will give Verizon a vast 5G spectrum position compared to its peers ... By losing Straight Path, AT&T missed an opportunity but still has multiple options to pursue,” Mark Stodden, senior vice president of Moody’s corporate finance group, wrote in a research note. “The transaction expands Verizon’s 5G spectrum holdings and gives the company certainty with its 5G architecture.”

So while Verizon appears to be prioritizing increased capacity over expanded coverage with 5G, T-Mobile is taking the opposite tack and will use its 600 MHz to launch 5G in some areas of the country in which it hasn’t had much of a presence. AT&T, meanwhile, can use the 700 MHz accessible to the carrier as part of its FirstNet win to expand its network footprint as it increases capacity with its high-band portfolio. But AT&T wasn’t awarded that contract until several weeks ago, and building an ecosystem to support the FirstNet spectrum will take time.

Finally, Sprint continues to tout the benefits of its 2.5 GHz spectrum. The nation’s fourth-largest carrier declined to participate in the incentive auction from the outset as it struggled to regain financial stability. And while its trove of 2.5 GHz airwaves is tremendously valuable, some analysts continue to question whether it can fully leverage that spectrum without striking some kind of deal with an existing carrier or a company looking to move into the wireless market.

First movers aside, flexibility will be key

Verizon and T-Mobile, then, may be best-positioned among U.S. operators to capitalize on 5G, according to Brian Goemmer, president of Allnet Insights & Analytics. But they’ll do so in very different ways. And like their rivals, they’ll need to be flexible as 5G usage and business cases evolve beyond early trials to full-blown commercial deployments.

“Verizon and T-Mobile both think they have a first-mover leg up,” with Verizon hoping to leverage an early edge in increased capacity and T-Mobile looking for significant coverage expansion. “I think a lot of it comes down to what ends up being the services that carriers (hone) in on that consumers want to pay for. If those services tend to be a lot of data traffic, obviously T-Mobile will have to look at going to the millimeter wave spectrum auction and acquiring some of that high-band spectrum if that’s the consumer drive for 5G business models.” Conversely, if demand for high-data services is high outside highly populated areas, Verizon may have to consider using more low- and mid-band spectrum for 5G. – Colin | @colin_gibbs