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Analyst Angle: Longer licenses for 3.5 GHz spectrum will be good for 5G

In recent weeks CTIA and T-Mobile US have both asked the Federal Communications Commission to change the way the agency plans to allocate the Citizens Broadband Radio Spectrum. If adopted, the proposed changes will help U.S. mobile network operators deploy spectrum in the 3.5 GHz band for 5G services. Conversely, if the FCC does not change its current plan, the potential of the 3.5 GHz band for 5G deployments may go largely unrealized in the U.S., while other countries move forward with 5G in the 3.5 GHz band.

U.S. carriers want the FCC to “change the priority access license term from three years to a standard, ten-year license term with an expectation of renewal to promote investment in the band.” There is currently a guarantee for 6 years before a license is due to be renewed. This change would effectively give a PAL holder a 20-year time frame before any renewal is required if the same logic is upheld for the current proposal. Given the long-term investment outlook for any spectrum assets by a mobile operator, this does not seem unreasonable.

In addition, carriers would like to see the FCC enlarge the PALs from census tracts to partial economic areas. The census tract model seems extremely complicated with over 70,000 areas currently defined. The FCC can barely handle the current areas it auctions, which taken to the most granular level of cellular market areas (CMA) is 734.

The leap of over 100x to over 70,000 areas to be assigned seems to be a way for the U.S. government to make more money from the auction process by forcing any potential PAL licensee to bid a substantially higher sum for the total number of census tracts that would need to be combined to form the previously used PEAs, of which there are 416. For example, there are 42 counties that make up PEA1 for New York. New York county (also known as Manhattan) itself has over 300 census tracts down to the level of one tract for every 8 city blocks!!! For T-Mobile or any other mobile operator to cover all of Manhattan would require them to bid on over 300 areas.

Carriers are also asking the FCC to make all PALs available regardless of the number of applications received. The current proposal would not assign any PALs if only one company requests a PAL in a specific area. This would potentially leave geographical areas without an anchor PAL tenant and could create patches of areas with no continuity of service. For a nationwide mobile operator, it does not make sense to leave areas open without the ability to guarantee seamless coverage from one area to another.

In summary, U.S. mobile network operators are much more likely to deploy 5G services using the 3.5 GHz band if the FCC adjusts the rules under which it will make this spectrum available. The proposals put forth by CTIA and T-Mobile US will benefit not only the wireless carriers, but their customers as well.


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