TR Daily Observers Call 28 GHz Band Auction Successful
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Friday, January 25, 2019

Observers Call 28 GHz Band Auction Successful

Several observers called the FCC’s 28 gigahertz band auction, which ended yesterday with $702.6 million in bids (TR Daily, Jan. 24), successful, despite the fact that it didn’t generate the billions of dollars that some other sales have.

“The Auction 101 results provide a clear indication that the wireless industry views millimeter wave spectrum as an important part of our country’s 5G future. From Honolulu, Hawaii to Fulton, Illinois, bidders continued to recognize the need for more spectrum to satisfy our nation’s growing demand for wireless services,” said Ari Meltzer, a partner at Wiley Rein LLP.

“It is clear that bidders placed real value in the 28 GHz spectrum,” added Rick Engelman, an engineering consultant with Wiley Rein. “The FCC received numerous bids for most licenses, with bids reaching prices that rivaled, and in some cases exceeded, those reportedly paid in private 28 GHz transactions.”

“I think the 28 GHz auction was a success, especially considering that the auction covered less than a third of the US, Honolulu (not even a top 50 market) was the largest market available and there were only two incentivized bidders: Verizon and T-Mobile. The key is to keep going and auction more mmWave spectrum. In auctions where the entire US is available more bidders will show up and spectrum auction receipts will be higher,” said Roger Entner, founder of Recon Analytics LLC.

“We also have to remember that all spectrum is not equal, just like real estate,” Mr. Entner added. He noted that “mmWave spectrum requires more equipment and installation to arrive at a similar build out. When you have x billion to build out a given amount of territory, and your equipment and installation cost goes up, then less is left over for spectrum. That doesn't mean lower spectrum prices are a failure, but a simple function of what is left over for spectrum after you accounted for the cost of building out.”

“Foremost, the auction will result in U.S. wireless providers gaining access to needed high-band spectrum. This high-band spectrum will be an important component of the deployment of 5G infrastructure, including often overlooked backhaul support. In this sense, without more, the 28 GHz auction has been successful,” said Free State Foundation President Randolph May.

He added that “the auction du jour critics often choose to ignore, in offering up comparative figures from one previous auction or another, that the bidding results will reflect the technical characteristics of the particular spectrum bands at auction. In other words, high-band spectrum like the 28 GHz band almost certainly will lead to different results than low-band spectrum, say, the 600 MHz frequencies. For one thing, high-band frequencies do not allow transmissions to travel as far as low-band ones. Of course, factors like this affect the value of the spectrum.”

Mr. May added that “the revenues ultimately realized from the 28 GHz auction appear to be within the range of the pundits' pre-auction predictions regarding the likely results.”

Walter Piecyk, an analyst for BTIG LLC, noted in a blog posting that the 28 GHz band sale garnered $0.0113 MHz/pop. “This auction did not include population dense markets and therefore is not comparable to Verizon’s acquisition of Straight Path that was valued at $0.0145/MHz/POP,” he added.

The FCC auctioned upper microwave flexible use service (UMFUS) licenses in the 28 GHz band by counties in two 425-megahertz blocks. The licenses were offered in only about half of U.S. counties, largely in rural areas, due to encumbrances from Verizon Communications, Inc., and other incumbents.

There were 40 qualified bidders in the 28 GHz band sale, including major players such as AT&T, Inc., Verizon, T-Mobile US, Inc., United States Cellular Corp., and Dish Network Corp.

Next up will be the 24 GHz band auction, which is expected to generate stronger interest as the spectrum doesn’t have the same level of encumbrances. Licenses will be available in all 416 partial economic areas. The FCC is auctioning seven 100-MHz blocks. The applications of 58 entities have been deemed complete for that sale, including those from many of the same players that qualified to bid in the 28 GHz band auction.

The FCC said yesterday that it will announce the start date for the 24 GHz band sale next week. The identities of winning bidders for both auctions won’t be released until after the 24 GHz band auction closes.

“We’re pleased to see the successful conclusion of the first 5G high-band spectrum auction and we look forward to additional auctions in 2019. These auctions will accelerate the deployment of next-generation networks and help America win the global 5G race,” said Scott Bergmann, senior vice president-regulatory affairs for CTIA.- Paul Kirby, [email protected]

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