5G and Beyond

Former Google chief warns 'massive sums' paid for C-Band will stall 5G

Auction 107 was Room 101 for US network operators.

Former Google boss Eric Schmidt seemed to think as much in a forthright opinion piece published in the Financial Times (paywall applies).

An Orwellian torture chamber, Room 101 is where prisoners are subjected to their worst nightmares. For Schmidt, who now heads Schmidt Futures, the financial pain endured by successful bidders in the "clock phase" of Auction 107, when blocks of 5G-friendly C Band (3.7GHz-3.98GHz) spectrum were put under the hammer, will be right up there in the excruciating category.

Rather than celebrate the record-smashing $81 billion raised for the US Treasury, Schmidt warned that the outcome was a "digital setback that America and its allies can ill-afford."

At a time when he thought that US 5G investment should be a priority to catch up with China, Schmidt warned the huge capital outlays "will probably result in disinvestment and downsizing," especially as C-Band licenses impose "no meaningful requirement to build necessary network infrastructure."

He ruefully added that the "massive sums winners paid for the spectrum will reduce their financial capacity to actually use it."

"The outcomes are predictable," he continued. "Americans will face higher prices and weaker digital services – yesterday's Internet tomorrow. That is what happened when European telecom companies paid over the odds during the 3G auctions of the early 2000s. Europe is still recovering from its lost digital decade."

Debts of ingratitude

Schmidt's pessimism is not unfounded. Although the identity of bidders and how much they've committed to spend will not be revealed until the assignment phase of Auction 107 is completed, there are signs operators shelled out much more than they anticipated.

Analysts at Credit Suisse, for example, reckon that AT&T, T-Mobile and Verizon will need to increase their aggregate debt load by a quarter, to $400 billion, to finance their expected purchases.

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Only a few days before the clock phase was wrapped up, T-Mobile announced it had issued senior notes worth $3 billion. Bloomberg reported that the original aim was to try to raise $2 billion in this way, suggesting Auction 107 put some unexpected strains on the budget.

5G rollout at C-Band will not be cheap, either. Schmidt Futures estimates that a gigabit C-band network, covering 80% of Americans, will require 1 million new cell sites and cost around $70 billion to build.

"Without it there will be no 5G, and no base on which to build 6G," said Schmidt. "America's digital economy will become an also-ran."

Schmidt's suggestions

To build rapidly a "viable alternative" to what he called a "Chinese digital hegemony," Schmidt outlined some "aggressive, innovative strategies."

Among them, he suggested Congress should use the proceeds of Auction 107 for a special data infrastructure fund to provide direct aid to states that build physical 5G infrastructure. Any future auctions, he added, should set stringent build requirements with penalties for underperformance.

Policymakers, he insisted, must pursue all available means to bolster digital infrastructure rather than focusing on filling government coffers.

— Ken Wieland, contributing editor, special to Light Reading

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