FCC Floats 600 MHz Auction Rules

Posted by Sam Churchill on

The FCC may reserve up to a third of licenses sold in a TV airwaves auction next year for smaller wireless carriers – if a minimum revenue threshold is met – according to Re/Code. Companies that hold at least one-third of the low-band spectrum in that market wouldn’t be allowed to bid on the 30 MHz of spectrum that has been set aside in restricted bands.

The 600 MHz plan allows all wireless carriers to bid for airwaves in the remaining part of the spectrum (in unrestricted bands), estimated to be about 40-60 Mhz, in an effort to drive up revenues from the sale.

According to Re/Code, the licenses would be mostly paired in 5 megahertz blocks. If bidding reaches a to-be-determined threshold price, the agency would set aside up to 30 percent of the licenses for companies that don’t currently hold a lot of nearby airwaves. Winners couldn’t immediately flip their licenses and sell them to the larger wireless carriers, sources said.

Comprehensive LTE coverage is far cheaper at 600-800 MHz because only 1/5th to 1/10th the towers are required. Sub 1 GHz spectrum is largely how and why the duopoly became a duopoly.

Verizon and AT&T currently own about 80 percent of low-band spectrum in the 700 and 800 MHz bands. Sprint and T-Mobile have virtually none. Apparently – if price minimums are met – the duopoly will be capped at 70% of the 600 MHz band.

Smaller carriers might argue that a 50% cap on the duopoly would be fair, and encourage competition. But Sprint owns so much 2.6 GHz, perhaps the two largest carriers would have had a legitimate case of unfair discrimination.

AT&T, in Wednesday’s filing, expressed concerns that, in some markets, the plan to restrict up to 30 MHz could leave only one bidder with an opportunity to get a block of airwaves large enough to deploy LTE technology, reports Reuters.

“If the restrictions as proposed are adopted, AT&T will need to seriously consider whether its capital and resources are directed toward other spectrum opportunities that will better enable AT&T to continue to support high-quality LTE network deployments to serve its customers,” AT&T Vice President Joan Marsh said in an FCC filing (pdf).

AT&T says in all band plans less than 70 MHz, restricted bidders — particularly AT&T and Verizon which currently own most of the 800 and 700 MHz band — would be limited to bidding for only 3 blocks. AT&T says at most only one restricted carrier could emerge from the auction with a 10×10 MHz allocation. And it wouldn’t be economical.

But the FCC is expecting 85MHz of spectrum to be available, not 70 MHz. Sprint uses 5×5 Mhz for LTE on PCS and aggregates it with other LTE spectrum. AT&T must not have heard about carrier aggregation.

The proposal is said to represent an effort by Wheeler’s aides to meet two broad, conflicting goals of the auction: Raise as much money as possible (by selling licenses to wireless giants AT&T and Verizon) while increasing competition (by selling licenses to smaller carriers).

The FCC could vote on the plan and release details to the public as soon as mid-May, although some details may change in the coming weeks.

According to four people briefed on the plan, the agency would create two separate classes of licenses for sale in the TV airwaves auction next year, restricted and unrestricted. Restricted licenses would affect carriers like AT&T and Verizon which currently control almost all the sub 1 GHz spectrum.

Currently, the agency thinks it will have about 85 megahertz of airwaves from broadcasters in urban areas to auction off, sources said. There could be more licenses available in rural areas.

Under Wheeler’s plan, airwaves held by Sprint and Dish Network that were previously excluded from the “spectrum screen” would now be factored into the calculation. The new limits apparently wouldn’t be used to hinder carriers from acquiring spectrum in the TV airwaves auction next year, but would apply in the future.

The new spectrum calculation would make it easier for AT&T and Verizon to add to their spectrum holdings but could hinder Sprint, which controls a significant amount of 2.6 GHz airwaves that aren’t as valuable as their competitors.

In February, Sprint proposed the FCC adopt a “weighted wireless broadband spectrum screen” that would accord competitive advantages to spectrum under 1 GHz. It’s aimed at the duopoly which now dominates 700MHz and 800MHz spectrum ownership.

According to a study commissioned by T-Mobile, covering Arizona with 700 MHz LTE would cost $19 million, but it would cost $58 million to cover the same area with 1900 MHz. Only one-tenth the number of towers are required to provide coverage at 600 MHz compared to 2.6 GHz. That’s why 700 MHz can cost $1 Mhz/pop vs $.10 Mhz/pop for 2.6 GHz.

All in all, you could argue the 600 MHz rules are a win for big carriers. In an alternative world, perhaps one third of that spectrum could have been set aside for unlicensed use, maybe in unpaired 5 MHz chunks, with a 10 MHz chunk available for municipalities to use as they will. But somebody’s got to pay for SafeNet, the nationalized first responder network.

Too bad half the money will go to pay off television group owners — who have never paid one dime to use the public airwaves and have never “owned” that spectrum.

Currently both AT&T and Verizon control 20 MHz each on the 700 MHz band, while T-Mobile and Sprint have none. AT&T probably needs 600 MHz spectrum more than Verizon (which has AWS).

The FCC’s 700 MHz auction, auction 73 in 2008, raised $19.6 billion for the U.S. Treasury with AT&T Wireless and Verizon Wireless accounting for the bulk ($16 billion).

The winning bids for the A, B, C, and E Block licenses exceeded their reserve prices with AT&T and Verizon paying an average $1.51 per MHz/POP. Next years auction should see prices considerably higher since the 2008 auction was mostly pre-smartphone era.

The term “MHz-pops” is a standard evaluation of spectrum derived from multiplying the number of megahertz associated with a license by the population of the license’s service area.

The overall $/MHz-Pop for the 700 MHz auction was $1.22
— ($19 billion / 52MHz x 300 million population)
— Average per MHz for nationwide coverage = $365 million
— Average per 6 MHz for nationwide coverage = $2.2 billion

Using the figures (above) if 85 MHz were auctioned off nationwide, it presumably could generate $30-$50 billion.

The 600 MHz auction should be interesting. Especially if Google, Facebook, Amazon and Dish Networks are added to the mix. Perhaps 2.6Ghz/5GHz small cells combined with 600MHz will enable new business models.

Enabling competition to Comcast and the wireless duopoly would be a good thing.

Related Dailywireless articles include; 700MHz: Money Talks, 700MHz: It’s Done!, Dish: Lower 700MHz Power Ups Speculation, AT&T and Verizon: No 700 MHz Interoperability For You!, AT&T Competitors: No 700MHz Roaming, FCC Announces H Block Auction, Dish Won’t Bid on H Block Spectrum, AT&T Buying Leap Wireless (Cricket), FCC Limits Dish on LTE Terrestrial Spectrum, Dish: On the Move, Dish and Sprint Battle over PCS band Extension, FCC Approves 2.3 GHz for AT&T, AT&T Likely to Get 2.3 GHz, Sprint’s Dish Compromise, Nexus 4 Deals for Voice/Data, MetroPCS Merges with T-Mobile USA, The Duopoly’s Worst Nightmare, Arctic Technology, Wheeler Advocates for Spectrum Caps at 600MHz , 600 MHz Auction Speculation,

Posted by Sam Churchill on Monday, April 14th, 2014 at 9:32 pm .

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