Big Spenders Seize Game-Changing Spectrum

US C-band auction concludes with record total bids

On 24 February, the US Federal Communications Commission (FCC) announced the eagerly awaited results of Auction 107, also known as the C-band spectrum auction. According to the telecom regulator, the auction generated more than $80 billion in collective gross bids.

The process involved the sale of licences to use 280 MHz of radio frequency in the C band, located in the 3.7 GHz to 3.98 GHz band of the spectrum map. This frequency hasn’t been available until now because it has yet to be reallocated from its use for satellite TV. Participants bid for licences to use individual 20 MHz blocks, which were further divided into 406 geographic locations in the US. This was a major undertaking for the FCC, involving 5,684 licences, 57 registered bidders and 97 bidding rounds.

This portion of mid-band spectrum is important for 5G services in the US. There are currently 5G services, such as Verizon’s 5G Ultra Wideband, that are supported by millimetre-wave spectrum. This offers a good high-speed service over short distances, but signal quality tends to weaken significantly the farther it has to travel. Operation at the newly sold mid-band frequency will offer the perfect combination of high-speed transmission over relatively long distances. So, the availability of this much sought-after frequency will be a game-changer for the expansion of 5G services in a country the size of the US.

The importance of this frequency is reflected in the astronomical spending, and it’s no surprise that Verizon was the biggest spender, handing over $45 billion for 3,511 licences to operate blocks throughout the US.

This is a crucial win for Verizon, which ended 2020 with coverage of its 5G Nationwide network — which is built on sub-6 GHz spectrum — comprising more than 230 million people in more than 2,700 US cities (see Instant Insight: Verizon Results, 4Q20). Its 5G Ultra Wideband network covers 61 cities, 48 stadiums and arenas and seven airports. The new spectrum will allow the carrier to address its mid-band shortage, offering services at speeds faster than those possible on its 5G Nationwide network and with a greater coverage than its 5G Ultra Wideband network.

AT&T was the second biggest spender, paying out $23.4 billion for 1,621 licences. It’s a substantial investment for a company that recently reported a net loss of $13.5 billion from impairment charges on its video and entertainment business (see Instant Insight: AT&T Results, 4Q20). That said, a major US carrier like AT&T can’t afford to step back from such an important auction.

In third place was T-Mobile, spending a “mere” $9.3 billion on 254 licences. However, this is hardly surprising, as T-Mobile already has licences for mid-band spectrum that it gained through its merger with Sprint (see A Tasty Spectrum Sandwich).

Acquiring licences is only the beginning. The winners now need to build the infrastructure that will underpin their services. The C-band frequencies will be released in two separate sections from the end of 2021, so mid-band 5G services could be commercially available from as early as the first quarter of 2022.

In the battle for cellular airwaves, it seems that the FCC is the biggest winner, reaping $80.9 billion, a sum that easily smashes the previous record of $44.9 billion for Auction 97, which took place in 2015.

I can’t help but wonder if this result will actually hurt the industry. It seems like US carriers are in danger of making the classic error of forking out for licences at the expense of infrastructure.

US carriers were some of the first adopters of 5G, yet growth has been slow until now. The new spectrum and the spike in availability of enabled devices will help carriers achieve a steeper adoption of 5G connectivity (see Market Forecast: 5G Connections, Worldwide, 2020-2025). But despite this rise in adoption, how long it will take these companies to recoup their investment is anyone’s guess. I fear that it could be US consumers who end up paying.