Exclusives : Stage Set for AT&T, T-Mobile, Verizon at Highly Anticipated C-Band Auction

Stage Set for AT&T, T-Mobile, Verizon at Highly Anticipated C-Band Auction

All eyes are on the Federal Communications Commission (FCC)’s C-band auction set for December 8. However, looks can be, at least slightly, deceiving. Despite huge demand among top players for what is widely considered landscape-altering spectrum (3.7-3.98 GHz; 280 MHz), experts say the auction will fall short of record-breaking revenues.

In-Demand C-Band Spectrum

“It’s very important, because it’s in that ‘Goldilocks’ zone where you have reasonable outdoor propagation and it’s efficient spectrum that provides the speeds that we need,” said Roger Entner, Lead Analyst of Recon Analytics, speaking to 6GWorld when asked how critical the auction will be to shaping the telecommunications sector in the United States.

As context to the situation at hand, the FCC held a Citizens Broadband Radio Services (CBRS) spectrum (3.5GHz band) auction last summer. It resulted in $4.5 billion in revenue for the U.S. government.

The summer auction (designated No. 105) was notable for several reasons. For one, the CBRS had just been commercially deployed at the start of the calendar year. It also made available a swath of highly regarded mid-band spectrum. Finally, it featured the most licenses ever made available at a single auction (22,631). All that taken into account, the C-band auction (designated No. 107, with No. 106 having been postponed) is still poised to be more significant.

To put it in perspective, analysts are predicting C-band auction revenues to be nearly 10X as much. Some estimates are in the $35 billion range, if not higher. Part of the reason is because spectrum in the C-band is that much more valuable relative to in the CBRS, according to Amit Nagpal, Partner at Aetha Consulting.

“[…] The CBRS has a lot of power constraints on the way that it can be used. So, the fact that you can use much more power with C-band means the signals can get further and punch through more obstacles that are in the way,” he said, speaking during a “Sparring Partners” webinar hosted by consulting-firm Senza Fili. Nagpal even suggested it would approach a $45 billion record set by the AWS-3 auction in 2015, but would ultimately fail to reach the high-water mark.

Great Revenue Expectations

“I’m guessing it would get you to something not far away from about $40 billion. If you ask me to put a number on it, I would probably go something like $0.40 per MHz-pop. It’s double the CBRS numbers. It’s a lot more valuable than the CBRS to the operators,” he said. “There’s a lot of spectrum now and there’s more coming. You can see a roadmap for more, so that constrains the price. I think I would struggle to see the total proceeds go above the $45 billion.”

Speaking to 6GWorld in an exclusive interview, Senza Fili President Monica Paolini argued that another key reason the C-band auction is so critical is because of how T-Mobile leads top competitors Verizon and AT&T in terms of reported mid-band spectrum holdings.

Of all the qualified bidders, most analyst attention is on them. Verizon took the CBRS auction as an opportunity to eat into that lead, buying 557 licenses, which totaled a field-leading $1.9 billion. Meanwhile, AT&T failed to win a single one itself.

“From Verizon’s point of view, CBRS and mmWave are very good additions to their network, but they really need to have good mid-band, licensed spectrum,” Paolini said. “AT&T and Verizon will definitely do the best they can afford to get the spectrum. My point is the price might get higher if there is more competition from other players like Dish and cable operators and others.”

“All of it is about keeping pace with T-Mobile. On my little short list are Verizon, AT&T, Dish, and the cable companies, and C&C [Comcast and Charter Communications who are bidding together],” agreed Entner, reinforcing what’s at stake. “Spectrum is what differentiates a network and the network is the No. 1 reason why people change carriers.”

Three-Horse Race Between AT&T, T-Mobile, Verizon?

In Entner’s opinion, given the opportunity, T-Mobile will spoil its competitors’ parties. However, T-Mobile’s pending acquisition of one-time Sprint affiliate Shentel could theoretically impact its desire or ability to do so. In effect, citing a general lack of resources, Entner had a revenue estimate on the low end of around $20 billion.

“There are people for whom this is the most awesome thing ever. They need it. But who has the money for it,” he asked, likening C-band spectrum to a sports car. “Just because a Ferrari is the most awesome car ever, it doesn’t mean everybody can afford it. If you look at how the auction is split up and all of that, there is something for everybody and you have four motivated buyers? Three and a half? I don’t see how we get to $40 billion.”

AT&T is a good example, as it reportedly lags in 5G behind T-Mobile and Verizon. Also, AT&T has reportedly been struggling with debt, selling assets in the lead-up to the auction, including its stake in Central European Media Enterprises for $1.1 billion.

Verizon has been selling assets, $12 billion in bonds, too. However, New Street Research estimated Verizon’s raised capital further padded a war chest of approximately $24 billion. Pointing to how Verizon didn’t purchase CBRS licenses that align with its 4G networking needs, network-monitoring company Tutela suggested Verizon, in spite of its performance at Auction 105, saw it only as an appetizer. Instead of a main course though, it may be more of a main eventbetween AT&T and Verizon, in Nagpal’s eyes.

“If CBRS was the only thing in the game, it would have been incredibly valuable, but if you know that you’ve got this thing, which you can’t use very much of, you can’t use it to the extent you would like, and six months later 280 MHz of this thing that is very useful to you is coming along, you’re going to keep your money in your pocket and use it for where you need it, unless you’re desperate,” he said.

“I can see a big fight between Verizon and AT&T for that spectrum that’s available as soon as possible. So they can go back on T-Mobile, but for the full 280 I can also see T-Mobile being interested… but I wouldn’t expect it to have the same appetite and the same value as obviously AT&T and Verizon.”

Feature image courtesy of Bill Oxford (via Unsplash).




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