Verizon's C-Band meal might not leave crumbs for anyone else
Following months of debate, the FCC is moving forward with a plan to auction an enormous swath of midband spectrum for 5G starting in December. And Verizon – the nation's largest wireless network operator – could be positioning itself to grab just about all of it.
"As we look at C-Band, it brings forward some use cases that could increase the size of the 5G opportunity for us," Verizon CFO Matt Ellis said during a recent investor event, responding to a question about the FCC's C-Band auction of midband spectrum scheduled for December. "For some parts of that spectrum, whoever wins those pieces [at auction] – the first 100MHz in 46 of the top 50 markets – would expect to have that spectrum available to use by the end of next year."
Part of the reason Verizon executives might be so publicly salivating at the prospect of a C-Band auction is that the FCC decided not to put any firm limits on the amount of C-Band spectrum any one operator can buy.
T-Mobile, along with some other, smaller network operators, had urged the agency to issue rules that would prevent a single C-Band auction participant from purchasing more than a third of the total available spectrum up for bid.
Instead, the agency said that the C-Band auction would only be subject to its "spectrum screen." The screen has been used for years by the agency to keep tabs on the amount of spectrum operators own. If an operator wants to purchase more than one-third of the total amount of spectrum in a given market, that action triggers an FCC investigation into the transaction. However, the agency has rarely used the screen as a basis to prevent spectrum purchases.
Moreover, FCC is working to encourage the satellite companies that are currently using C-Band spectrum to quickly free it up for 5G. Specifically, the agency is dangling almost $10 billion in "incentive" payments to get incumbent C-Band users like SES, Intelsat and Eutelsat to quickly release the band for 5G. After all, existing C-Band users will need to update their satellite equipment to release the 280MHz worth of spectrum the FCC wants to auction for 5G.
And above and beyond those incentive payments, the agency also said that winning C-Band spectrum bidders can negotiate directly with existing C-Band incumbents to get them to release the spectrum more quickly. Such rules will allow Verizon, for example, to negotiate directly with a C-Band user like Intelsat in order to begin deploying a 5G network in C-Band spectrum as early as next year.
"These may amount to a few more millions [of dollars] rather than billions but still are a positive for satellite operators, Intelsat in particular," wrote Sami Kassab at investment bank Exane/BNPP, according to Advanced Television.
So will Verizon dangle some extra cash to C-Band incumbents to get them to free up the spectrum more quickly? "You'll have to ask the satellite companies for how they see it evolving from their perspective," dodged Ellis in response to questions on the topic.
So far, no major C-Band incumbent has indicated whether it will participate in the FCC's "incentive" program; they have until May 29 to do so.
Verizon's midband hunger
Despite the operator's arguments to the contrary, analysts continue to fret that Verizon's nationwide wireless network will soon run out of capacity. "Major American networks will hit 100% of sub-6GHz capacity in key cities by 2023," warned the analysts at Mobile Experts in a recent report, without naming any specific operators.
And though Verizon has purchased billions of dollars worth of unused millimeter wave (mmWave) spectrum for 5G, such spectrum isn't suitable for covering large geographic areas because transmissions in such bands can only travel a few thousand feet in the best of conditions.
Transmissions in the midband spectrum, however, can travel several miles, depending on how transmission equipment is configured. That's part of why 5G proponents have been clamoring for the US government to release more midband spectrum, like the C-Band, for 5G.
Verizon's rivals have been tacitly warning that the carrier will soon need to bolster its network with additional midband spectrum to keep pace with customers' data demands.
"We'll certainly have an interest in it [the C-Band auction], but quite frankly it's not something that's essential to us on an immediate basis because we have this significant amount of spectrum already owned and already placed in service," AT&T CFO John Stephens said during a recent investor conference, pointing to the WCS, AWS and FirstNet spectrum AT&T has been adding to its network in recent years. "We don't have the immediate need for that [C-Band] spectrum or putting new spectrum into service in the same light as some of our competitors."
Midband spectrum hunger is part of why T-Mobile has been doggedly pursuing its $26 billion proposed merger with Sprint. The company has promised that the combination of its expansive 600MHz spectrum holdings with Sprint's vast 2.5GHz midband spectrum portfolio will create a "transformational" 5G network.
One of the first 5G services that T-Mobile said it would offer under the merger is high-speed, in-home Internet across huge portions of the country.
That may well be the kind of "interesting use cases" that Verizon's Ellis and other Verizon executives are considering as they think about what they might do with the C-Band spectrum.
— Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano
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