December 18, 2020
The C-band spectrum auction for 5G on Friday passed the $25 billion threshold after roughly nine days and 30 rounds of bidding. It shows no signs of slowing down.
According to analysts surveyed by Bloomberg, the event could end with $47 billion in total bids, based on the trajectory of bidding. That would push the event past the $45 billion raised in 2015 by the AWS-3 spectrum auction, and make C-band America's biggest-ever spectrum auction.
Indeed, the AWS-3 auction, dubbed Auction 97 by the FCC, stretched across 45 and 341 rounds of bidding. According to figures provided by BitPath's Sasha Javid, the C-band auction – dubbed Auction 107 – is tracking Auction 97 very closely in terms of demand.
Perhaps that's no surprise. According to the financial analysts at New Street research, the massive 280MHz worth of licenses up for grabs in the C-band auction will help to increase the total amount of spectrum available to all 5G carriers by 38%.
"This will be particularly productive spectrum because it can support wide channels, massive MIMO and beamforming," the analysts wrote in a recent report to investors. "As such it increases capacity in the hands of the carriers by 64%."
Incredibly, the New Street analysts wrote to investors on Friday that the C-band auction appears on track to "blow through" their forecast of $52 billion in total bids.
There are a few key takeaways from these eye-watering figures:
The fact that bidders are willing to spend so much money on spectrum appears to reflect a widespread belief that 5G ultimately will be worth it. 5G networks built in C-band spectrum are expected to cover wide swaths of the country with blazing-fast speeds, and revenues from those offerings will necessarily have to recoup C-band auction expenses. That will be a tall order; C-band licenses covering New York City are inching toward $200 million each.
Verizon is widely expected to spend up to $20 billion on C-band spectrum in order to bolster its skimpy midband spectrum holdings. Verizon recently raised around $12 billion for possible spectrum purchases. T-Mobile, meantime, is expected to both bid on C-band spectrum for its network and to make sure Verizon pays dearly for its own C-band licenses.
Based on the overall amount of money pledged so far in the C-band auction, it's reasonable to assume that both AT&T and Dish Network are bidding heavily. That's noteworthy because both companies are financially stretched: AT&T is dealing with the debt incurred from its purchase of Time Warner while Dish is expected to spend at least $10 billion building its promised 5G network. According to the analysts at New Street, Dish in particular has no other choice: "Their cost advantage would disappear" if the company sat out the C-band auction. The analysts noted that Dish has $4.6 billion on hand to spend on the C-band, and the company will "stay dangerous" if it does so.
Finally, there are indications that cable companies Comcast and Charter – which are jointly bidding in the C-band auction – may invest heavily in C-band spectrum in order to build out their mobile ambitions. "We note that they have a combined $19 billion in cash on hand, nearly 3x their historical average, and nearly 2x their 1Q20 balance," wrote the analysts at Evercore in a recent note to investors.
The financial analysts at MoffettNathanson wrote just prior to the start of the C-band auction that the event is "the most important wireless auction of our time. Who 'wins' the C-band auction will shape the competitive dynamics of 5G for a decade."
The analysts explained that the C-band is ideally suited for 5G due to the massive, 100MHz blocks up for auction that sit squarely between operators' existing lowband and highband spectrum holdings.
"The C-band may well be the last bite at the apple for a very long time to come; there is precious little additional midband spectrum in the FCC's pipeline, and nothing with similarly large block widths," the wrote. "Yes, the stakes really are that high."
As in previous FCC auctions, no one knows which entities are bidding for which licenses during the auction. The FCC only discloses the amount of each bid on each license during each round. The agency will announce the winners, after tabulating the results, once the auction is over.
As in previous FCC spectrum auctions, the C-band auction includes several rounds of bidding per day. It will end when bidders stop bidding – many expect that to happen sometime early next year.
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