The soaring bids for mid-band spectrum in the FCC's latest auction have some interesting implications for future auctions and the wider US cellular industry.
The Advanced Wireless Services-3 (AWS-3) auction is now approaching $38.8 billion in bids for 65MHz of spectrum in the 1.7GHz and 2.1GHz bands, including 50MHz of paired channels for LTE uplink and downlink. (See Mid-Band's No Turkey! FCC Auction Tops $38B.)
That's way more than the initial Federal Communications Commission (FCC) reserve prices, or what many industry watchers had expected. It looks like it could double the $19.5 billion pulled in by the last major spectrum auction, the 700MHz sale in 2008. (See Verizon & AT&T Win 700 MHz Sweeps and FCC's AWS-3 Auction Tops $14B.)
The most obvious initial impact will be on the delayed Incentive Auction in 2016. TV broadcasters will now have a recent viable yardstick for actual market rates on the 600MHz spectrum that the FCC wants them to vacate so that bandwidth can be used for wireless broadband.
It also underlines how hard it would be for any new operator to enter the US wireless market by buying spectrum and building out a network at this point in time. Of course, in truth, it's been that way for a long while now, but -- despite the regulatory difficulties -- acquisition might be the easier option for any company up to the challenge in 2015.
All of this is also likely to increase interest in public spectrum options, with members of the Dynamic Spectrum Alliance Ltd. already asking the FCC to open up the 10GHz band for shared use.
Of course, we won't know exactly how much spectrum AT&T Inc. (NYSE: T), T-Mobile US Inc. and Verizon Wireless will win at auction, or how much they will pay for the pleasure. With the soaring prices per license, though, its going to be a hefty chunk of change for the winners.
So, this auction could potentially affect how the big carriers proportion spending in 2015. We've already seen some pullbacks on capital expenditure (capex) for other reasons, but spending billions on spectrum will likely cause the big carriers to further reevaluate network investment in 2015. (See AT&T's Mexican Capex Dance.)
— Dan Jones, Mobile Editor, Light Reading