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The 700 MHz Race

Dan Jones
LR Mobile News Analysis
Dan Jones, Mobile Editor
1/25/2008
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The 700 MHz race got off to a billion-dollar start this week with 216 applicants bidding for a piece of the last major spectrum allocation suitable for wireless broadband services that the Federal Communications Commission (FCC) is likely to offer for the foreseeable future.

The memorably titled "Auction 73" started Thursday morning with a total of $2.4 billion in "provisionally winning bids" (PWBs) for the A,B,C, and D 700 MHz bands. By the fourth round, on Friday afternoon, the PWB pot had grown to $3.7 billion.

The auction is, however, likely still in the early stages. The similar advanced wireless services (AWS) spectrum auctions in 2006 eventually garned $13.7 billion for the U.S. Treasury after more than 160 rounds. (See The Auctions Endeth.)

Indeed, the total winning bids do not yet even reach the aggregate reserve of $4.6 billion set for the flagship C-band by the FCC late last year. (See Google Confirms 700MHz Bid.)

To prevent potential bid-rigging and collusion between the players, the FCC isn't saying which companies are bidding on the spectrum. Nonetheless, big wireless and IT names like AT&T Inc. (NYSE: T), Verizon Wireless , and Google (Nasdaq: GOOG) are among the players expected to put up the big bucks. (See FCC Names 700 MHz Applicants.) There has been some debate as to whether the jittery state of the economy and U.S. stock markets will put a damper on the auction. It is still too soon say.

Nonetheless, the 700 MHz spectrum is prized for its long range and good building penetration qualities, even if it offers less bandwidth to deploy a nationwide network than current cellular radio waves.

And for the eventual winners, the cost of the spectrum will only be the first major outlay if they hope to deploy large-scale networks:

"Assuming the C Block licenses sell at or around their aggregate reserve price of $4.6 billion, and then assuming $20 per person in capex for the network rollout, it would cost a minimum of $10 billion to meet the 75 percent of population coverage requirement," notes Unstrung Insider analyst Gabriel Brown in a recent article on the band. "In reality, it's likely to cost much more than that to create a network that, regardless of technology, will have substantially less capacity than today's 2G and 3G networks." (See Outlook Mixed for WiMax at 700 MHz.)

— Dan Jones, Site Editor, Unstrung

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