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FCC 600 MHz Auction Expected To Raise Up To $35 Billion

November 25, 2015 - Written By David Steele

Apart from collecting unpaid fines, the FCC, Federal Communications Commission, have a challenge for 2016: managing the important auction for the 600 MHz spectrum being released by a number of North American broadcasters and being sold on to the cellular networks. This low frequency spectrum is important to the carriers as the lower the frequency, the deeper the penetration into buildings and the greater the range from the mast, although the slower the theoretical network speeds achievable. Investing in a substantial amount of 600 MHz spectrum should allow a carrier the ability to provide customers with a solid LTE signal even deep into buildings. Carriers may then bolster network capacity and speed with higher frequency masts in areas of congestion as and when necessary.

North America has four national carriers; AT&T, Sprint, T-Mobile US and Verizon Wireless. Of these carriers, Sprint has already stated that it will not partake in the auction, which leaves the two larger carriers (AT&T and Verizon) to compete with T-Mobile US. Given that the two larger carriers have deeper pockets compared with T-Mobile US, the FCC have a carefully laid out plan designed to both provide a fair price for the carriers combined with offering good value for the broadcasters releasing the spectrum. Of these three carriers still in the bidding, Wells Fargo have predicted that AT&T has the deepest pockets to spend on the auction and is believed to have a warchest of $10 billion earmarked for licensing the 600 MHz frequency, buying 2×10 MHz of spectrum. Wells Fargo are pitching T-Mobile US as having the second most to spend, at a creditable $8 billion, with Verizon Wireless having $5 billion. AT&T have said that their intention is to invest in the 600 MHz spectrum in order to build a national network and for T-Mobile US, they have a similar requirement – here, T-Mobile’s network is perceived as having a weaker network and will be using the 600 MHz spectrum to bolster nationwide coverage. Verizon are believed to have the ability to spend $10 billion in the auction, but Wells Fargo do not believe the carrier will spend this much.

In regards the overall revenue generated by the auction, Wells Fargo believe that it will bring in somewhere between $30 and $35 billion, some way short of the $45 billion that the FCC raised in the recent AWS-3 auction. The difference between the three competing national carriers and this sum will be from a number of other players and potential players in the market, such as Comcast, Softbank, Dish Network, Google and Chamath Palihapitiya, the former Facebook executive with ambitions to participate in the auction.