Verizon, AT&T, T-Mobile and other telecom operators have a new target with stage three of the FCC’s 600 MHz incentive auction set for its forward round.
Telecommunication operators are set for their third chance to acquire access to 600 MHz spectrum licenses, though they will need to come up with more than $40 billion in combined bids to close the Federal Communications Commission’s latest incentive auction round.
The government agency wrapped up the third stage of the 600 MHz incentive auction reverse auction process, with television broadcasters setting a $40.3 billion target price for 108 megahertz of total spectrum that the FCC plans to repackage into 80 megahertz of licensed spectrum on offer to interested parties. The third stage forward auction process is expected to begin Dec. 5.
Stage three is set to include a total of 3,303 blocks of spectrum, each of which with 10 megahertz of capacity. The licenses are to be broken into partial economic area-sized chunks, with each PEA having up to eight blocks of spectrum up for grabs.
Previous attempts at unleashing what is considered highly desirable low-band spectrum have fallen short as combined bids from telecom operators have failed to meet what television broadcasters have demanded.
Stage one of the process witnessed broadcasters requesting more than $86 billion for 126 megahertz of total spectrum, with telecom operators halting their bidding for 100 megahertz of clean spectrum at a mere $23 billion. Stage two had broadcasters asking for $56.5 billion for 114 megahertz of total spectrum, which failed to generate more than one round of forward auction bidding from telecom operators.
One positive for stage three is the total amount required to complete the auction has now come in below the record-setting amount seen in the most recent AWS-3 auction proceedings, which raised $44.9 billion in gross proceeds for 50 megahertz of licensed and 15 megahertz of unlicensed spectrum spread across the 1.7/2.1 GHz bands. There has been some concern that the large amount of money earmarked for those licenses could limit the amount of cash available for the 600 MHz bands.
Analysts have noted the 70-megahertz clearing target for a potential stage four of the 600 MHz incentive auction is the more likely round in which supply and demand could meet, noting the band plan associated with that stage most aligns with repackaging challenges and telecom operator interest.
The 70-megahertz mark also is the magic number for T-Mobile US and other carriers with a dearth of sub-1 GHz spectrum holdings. Pre-auction rules include a set-aside provision that calls for 30 megahertz of at least 70 megahertz of spectrum to be auctioned off outside the reach of companies with a dominate position in sub-1 GHZ spectrum holdings, which among larger operators is limited to Verizon Communications and AT&T.
Analysts have noted that as the complicated incentive auction process moved along it might appear the two sides could be getting closer to a match, though it must be taken into account that the amount of clean spectrum being offered to telecom operators is shrinking with every stage, thus total bid amounts per stage is also likely to drop.
Some have expressed concerns over the auction process actually finding a match between the two sides.
“The relatively modest 26% reduction in the clearing cost of the reverse auction is a strong indication that broadcasters are unlikely to give up their spectrum at anything but premium values,” noted Dan Hays, principal at PwC’s Strategy& division. “At $40.3 billion we believe that the cost is still far beyond the appetite of mobile network operators. This makes a fourth stage of the auction a virtual certainty. Even more disturbing is the notion that the large gap between the forward and reverse auctions could persist and perhaps be an early indicator a potential eventual failure to successfully complete the auction altogether.”
FCC Chairman Tom Wheeler has repeatedly cited the 600 MHz spectrum as key for 5G work, with the timing on having that spectrum available for commercial wireless services falling in line with plans for broader 5G deployments around 2020.
However, some have noted the government agency may have stymied its incentive auction plans with the announcement this past summer of its Spectrum Frontiers program, which looks to open up nearly 11 gigahertz of spectrum above the 24 GHz band in support of mobile telecom services. The spectrum is set to include 3.85 gigahertz for licensed use in the 28 GHz, 37 GHz and 39 GHz bands, and 7 gigahertz for unlicensed use across the 64 GHz to 71 GHz bands.
Those high-band spectrum assets include much wider swaths of licenses seen as important to the high-bandwidth needs of 5G services. A number of carriers and their vendor partners have already begun prestandard 5G technology trials using spectrum in those bands in an effort to gain insight into how the bands might operate in real-world deployments.
The FCC is also moving on a new spectrum-sharing model for the 3.5 GHz spectrum band that could provide access to what is considered mid-band licenses in support of 5G services.
The 3.5 GHz band is now in the hands of the Department of Defense for use in certain radar installations, as well as by non-federal fixed satellite service earth stations for receive-only, space-to-earth operations and feeder links. The somewhat limited propagation characteristics of the 3.5 GHz band are thought to be a good fit for the dense deployment plans for small cells and would likely limit interference with current users.
Sprint, which decided to sit out the incentive auction process, this week slighted the spectrum up for bid as “the spectrum of the past.” The carrier noted its ample 2.5 GHZ spectrum holdings as one of the reason it did not partake in the 600 MHz spectrum auction
“The world is moving towards high capacity wireless data networks, and in that world the best and most efficient spectrum that is needed to cater for that … is mid-band spectrum,” noted Sprint CFO Tarek Robiatti.
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