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September 30, 2021
In just a few days, the FCC is scheduled to start another massive midband spectrum auction for 5G. There's no telling what will happen during the event. Indeed, there are concerns that the auction – of spectrum licenses between 3.45GHz and 3.55GHz – might actually fail to reach its required reserve price of $14.8 billion.
But it's what happens after the auction that's really raising concerns.
"It will likely take at least three years (if not more) to prepare and then auction even a portion of the remaining lower 3GHz band, underscoring the need for carriers to pick up 3.45GHz spectrum at auction if they can," wrote the financial analysts at New Street Research in a recent note to investors.
Meaning, next week's Andromeda spectrum auction (that's the name the Light Reading editorial staff has given to the event) might be America's last big spectrum auction for a while.
Going big or not going?
The Andromeda auction – dubbed Auction 110 by the FCC, of 100 MHz of spectrum in the 3.45GHz- 3.55 GHz band – is scheduled to start October 5. The results, including who won what, aren't expected until January.
Some analysts believe the auction will generate significant bids – not in the range of the record-setting C-band spectrum auction earlier this year, but substantial nonetheless.
"This one hasn't attracted as much attention as the $80 billion C-band auction, but it could enable AT&T and Verizon to continue to close the spectrum gap with T-Mobile," wrote the financial analysts at LightShed Partners in a recent note to investors. "We expect all four national wireless operators to actively participate, driving bids over $30 billion."
Others, however, aren't so sure.
"The C-band spectrum holdings, carrier balance sheets, 40MHz spectrum caps, sharing requirements in some markets, and $14.8 billion reserve price could all combine to lead to a failed auction," warned the financial analysts at Morgan Stanley in a recent note to investors, pointing to FCC rules that limit bidders to 40MHz of winnings and to share licenses with some federal users. "This would be a particular risk if neither Verizon nor T-Mobile decided to participate at a high level in the auction. A failed auction might take several years to revisit, and could be a particular challenge for AT&T given their lower midband spectrum holdings."
However, the Morgan Stanley analysts said their "base case" for the Andromeda auction is gross proceeds of $17.5 billion, particularly given Canadian operators' heavy spending during their own recent midband spectrum auction.
5G players don't want to share
Nonetheless, there remain worries that US policymakers aren't moving fast enough to free up the spectrum for 5G beyond the Andromeda auction. Those concerns formed an undercurrent during the CTIA's latest annual 5G summit this week. The event – virtual for the second time – featured a wide range of top industry speakers discussing the future of cellular technologies in the US. And CTIA CEO Meredith Attwell Baker made sure to reiterate the trade association's call for more midband spectrum for 5G.
Midband 5G "is going to be a game changer," she said, adding that federal policies ignoring the potential of wireless technologies, including fixed wireless services, are "backward looking."
Operators presenting at the event – including T-Mobile's Neville Ray and AT&T's David Christopher – mostly talked up their ongoing 5G deployments and the advanced services they expect to support. Unspoken, but certainly implied, was an argument that they're making use of the 5G spectrum the government has released so far, and that they could use more.
Some lawmakers seemed to heed such arguments. For example, two House lawmakers recently introduced the Spectrum Innovation Act that would release at least 200MHz of midband spectrum between 3.1GHz-3.45GHz for mobile broadband.
However, the legislation would do so via a sharing approach like the one applied to the 3.5GHz CBRS spectrum band.
That's important considering the 5G industry generally does not want to share its spectrum with existing federal users. In response, Biden administration officials ranging from the Department of Commerce to the Department of Defense have argued that spectrum sharing should be viewed as the future of US spectrum policy in general.
But some analysts argued that the eye-watering sums raised by events like the C-band auction could help push lawmakers to simply reallocate federal spectrum exclusively to 5G, rather than attempting to share it between the two groups.
Specifically, the analysts at New Street pointed out that recent versions of President Biden's massive infrastructure bill would require the FCC to auction 200MHz of spectrum in order to help offset its enormous $1 trillion price tag. "We view this as a positive for the incumbent mobile carriers both in providing political capital for moving the Defense Department to free up spectrum and in tilting the scale for exclusive spectrum use licenses, as that raises more money," wrote the New Street analysts in a recent note to investors.
More broadly, the battle around 5G spectrum continues to bleed into national politics and US-China relations. For example, longtime political operator Paul Wolfowitz recently argued that massive US spectrum auctions ultimately benefit Chinese companies like Huawei.
"As long as the US itself relies on a model that favors the [US] Treasury and the giant telecom companies instead of consumers, it can't show others how to build 5G networks without Huawei's Chinese government subsidies," he wrote, arguing that Huawei's inexpensive equipment is alluring to network operators forced to spend billions of dollars on spectrum licenses at auctions.
Wolfowitz served as the US deputy secretary of defense under the George W. Bush administration, and he made his points in a new article in the Wall Street Journal. He suggested the US government embark on some kind of sharing regime for future spectrum allocations for 5G.
Not surprisingly, Wolfowitz's arguments sparked swift reactions.
"Why didn't I think of this?" snarked former FCC Chairman Ajit Pai in a tweet. "Instead of giving everyone a full and fair chance to compete for spectrum now in a transparent auction that raises money for the @USTreasury, let a big federal agency grant occasional access – someday – to the politically connected."
Others agreed. "The high price of the C-band auction argues for auctioning more spectrum – spectrum drives up prices – not destroying auctions," wrote Dean Brenner, a top Qualcomm policy executive, on Twitter.
Looking beyond the 3GHz band
Much of the current midband spectrum debate is focused on the lower 3GHz band – everything between 3.1GHz and 3.45GHz – which is currently used by the US military. 5G proponents hope to move those users off that band.
But the New Street analysts argue that won't happen anytime soon.
"The spectrum from 3.1GHz-3.45GHz is much more heavily utilized by government users than 3.45GHz-3.55GHz, making it more difficult to clear the spectrum for commercial users," they wrote. "Still, clearing just 100MHz of the less-utilized 3.45GHz-3.55GHz spectrum will cost over $13 billion; the cost of clearing the 350MHz below this (from 3.1GHz to 3.45GHz) should be meaningfully higher."
And that's partly why 5G industry players are looking elsewhere.
For example, there's a heated battle underway over the 12GHz band. It's currently used by some satellite operators, but Dish Network and others are pushing for new FCC rules that would release it for 5G. A recent T-Mobile FCC filing suggested the band "may hold great promise for supporting terrestrial 5G services."
Another area of interest is 2.5GHz. The FCC is expected to auction some of that spectrum next year. However, that auction will likely only release licenses in rural areas rather than in prized downtown locations. Further, T-Mobile is widely expected to dominate the event given its existing 2.5GHz midband spectrum holdings.
Finally, the FCC just today voted to potentially release portions of the 4.9GHz band for 5G. Specifically, the agency backtracked on its previous plan to create a state-by-state leasing framework for the band, and instead will move towards "a nationwide, coordinated framework that would emphasize public safety needs while increasing overall use of the band and putting public safety on a path to 5G."
Nonetheless, that process will likely take years to play out. And given the ongoing debate over the lower 3GHz band, the 12GHz band and other bands, it's reasonable to assume that this year's Andromeda spectrum auction will be the last big 5G spectrum auction for the foreseeable future.
Editorial Director, 5G & Mobile Strategies, Light Reading
Based in Denver, Mike has covered the wireless industry as a journalist for almost two decades, first at RCR Wireless News and then at FierceWireless and recalls once writing a story about the transition from black and white to color screens on cell phones.
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