The FCC recently concluded its first big midband spectrum auction for 5G, with Verizon, Dish Network, Comcast and Charter Communications snapping up hundreds of millions of dollars worth of spectrum all over the country.
However, the location with the most expensive proportional bids wasn't New York or Los Angeles. It wasn't Houston or Phoenix, or another big city where network operators typically battle over licensed spectrum ownership.
It was Loving, Texas, population 82 (according to the last census).
Incredibly, Loving, Texas, recorded the highest per MHz/POP price in the FCC's 3.5GHz CBRS midband spectrum auction, at $141 per MHz/POP.
To put that figure into perspective, the CBRS auction averaged a per MHz/POP price on a nationwide basis of just $0.215. The MHz/POP figure is a standard way of measuring the value of spectrum by the number of people covered compared with the amount of spectrum available. Other recent FCC auctions have clocked in at $2.21 per MHz/POP (the AWS-3 auction in 2015); $0.93 per MHz/POP (the 600MHz incentive auction in 2017); and $0.98 per MHz/POP (the PCS auction in 2005) on a nationwide basis
What this means is that the spectrum licenses covering Loving County, Texas which is located squarely in the middle of nowhere, on the western edge of Texas are more valuable on a per capita basis than the spectrum licenses covering Beverly Hills or Silicon Valley. (On an absolute basis, the licenses covering Los Angeles went for $52 million, the highest in the auction. The licenses covering Loving went for $116,000.)
What is so valuable about the licenses in Loving?
"It speaks to the fact that the revenue opportunity in Loving is tied to machines using the spectrum (oil & gas), not people," explained Brian Goemmer, founder of spectrum-tracking company AllNet Insights & Analytics, in response to questions from Light Reading.
As detailed by a number of local news stories, Loving is positioned over the Delaware Basin, a massive shale oil formation, making the city part of the hottest oil play on the planet.
For example, the San Antonio Express-News reported an estimated 100,000 workers have come to the area for the boom, which now hosts about 250,000 oil-producing wells and more than 500 working oil rigs about half the nation's total.
Thus, it's no surprise that two oil companies Occidental Petroleum Corporation and EOG Resources purchased six of the seven available CBRS spectrum licenses up for grabs in Loving. (Read on for the identity of the seventh Loving spectrum bidder.)
Interestingly, Evercore analyst James Ratcliffe noted that Chevron and a bidding entity called LocalLoop made some initial bids for the spectrum, but eventually lost out to Occidental and EOG.
EOG is one of the largest crude oil and natural gas exploration and production companies in the US, while Occidental claims to be the largest oil and gas producer in the Permian and Delaware basins.
Both companies have extensive ambitions for the Delaware Basin.
However, neither Occidental nor EOG can comment on their plans for their CBRS spectrum holdings in Loving due to FCC regulations. But they likely will use their shiny new spectrum assets to build 4G or 5G networks providing voice and data services for oilfield operations.
There is already precedent for this kind of operation. For example, a privately held company called Infrastructure Networks already covers 130,000 square miles of US territory with high-speed mobile data services specifically for industrial oil and gas companies like Halliburton and Schlumberger.
The spectrum purchases by EOG and Occidental point to two major new trends in the global wireless industry: private wireless networks and the Internet of Things (IoT). EOG and Occidental can use their licensed spectrum holdings in Loving to construct their own dedicated, privately owned 5G networks in order to connect not just people but all kinds of things. Those kinds of ambitions are clearly enticing to network equipment suppliers and other vendors salivating at the chance to connect thousands or millions of oil sensors, freight trucks and other objects for a brand new class of deep-pocketed customers.
And it's worth noting that EOG and Occidental weren't the only non-telecom companies winning licenses in the CBRS auction. The Wall Street analysts at Raymond James pointed out that traditional telecom companies including major wireless network operators, cable companies and rural Internet providers did account for the lion's share of the $4.6 billion in total bids raised during the event. However, energy companies like Southern California Edison and Sempra Energy accounted for 3.9% of total net bids. And Raymond James' "other" bidder category which includes everything from universities like Duke and Texas A&M to private entities, individuals, a real estate company and Deere & Company, maker of John Deere tractors accounted for 0.7% of total net bids.
The upshot of the FCC's CBRS spectrum auction is that major 5G providers continue to dole out big bucks for licensed spectrum. However, a noteworthy and potentially growing crop of "other" companies are also interested enough in wireless technology that they're willing to purchase spectrum for their operations.
One final, important takeaway from the story of CBRS in Loving, Texas, involves the wireless industry's biggest unknown: Dish Network. The company has been collecting spectrum licenses in various FCC auctions for more than a decade, and has promised to build a nationwide 5G network in the next few years. The company has said it hopes to make money from the sale of 5G to consumer smartphone users as well as IoT sectors ranging from drones to automobiles.
Dish purchased the seventh spectrum license in Loving.