Amazingly Vigorous Bidding for US Spectrum
A US government auction for airwaves is sending spectrum valuations to record levels, an indication of the bullish expectations by operators for continued growth in data download demand. This spectrum that’s being sold isn’t ideal, but it’s being priced at a premium. It seems there’s no such thing as bad spectrum.
After 27 rounds of bidding, the auction for 65 MHz of Advanced Wireless Services-3 (ASW-3) spectrum is causing a sense of frequency excitement not seen since the 3G airwaves bidding frenzy in Europe almost 15 years ago. It’s not a pleasant association given the painful hangover after that euphoria — the killer 3G service continued to be voice even years after 3G networks were switched on. However, operators can be quite certain that customer bandwidth demand in the current bidding battle will mean the airwaves won’t sit idle.
The Federal Communications Commission’s sale, officially titled Auction 97, began on 13 November and offers frequency that’s currently used by various US government security agencies in the 1.7 and 2.1 GHz ranges. Offers reached a total of $34 billion on Friday, more than triple the minimum reserve of $10.5 billion and more than twice what many had expected. Bidding should wind down this week.
The bids themselves are sealed, but the list of bidders is public and includes AT&T, Dish, T-Mobile and Verizon. Most of the spectrum is suited for LTE downlink services in densely populated areas. The greatest interest has been for spectrum in Chicago, Los Angeles and New York. Sprint said in a statement that the company chose not to participate in the current bidding, preferring to concentrate on next year’s auction for spectrum in the 600 MHz range.
The extravagant valuations being given to such mid-band airwaves is a windfall for Dish, which already owns 55 MHz of downlink spectrum in the same range. The satellite operator could work with a partner to use unpaired downlink spectrum to piece together a 4G network in some regions in the US. CCS Insight has predicted that pay-TV operators in the US would take steps during the coming years to offer mobile services to complete against multiplay packages from AT&T and Verizon: Dish could be among the first.
The US government agencies currently using the spectrum up for auction should clear out in the coming year. For the auction winners, 2015 will be a year to build out network infrastructure, and services under the new spectrum should become available during 2016.
The record bidding in the AWS-3 airwaves auction is sending shockwaves across the telecommunications industry, and has resulted in a market valuation boost for American operators such as Dish and Sprint. These companies already own mid-range spectrum that now appears to have been underappreciated and undervalued. As we move toward a mobile-first environment, it’s clear that frequency is the one scarce resource. Operators will need to spread their services across wireless technologies like LTE and Wi-Fi to accommodate the growing demand for mobile data downloads and VoLTE services. If valuations — and risks — appear high, at least it can be said that it’s different this time.
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