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Analysts Lower FCC 600 MHz Spectrum Auction To $25-35 Billion

February 11, 2016 - Written By Muni Perez

As mobile internet and connected devices numbers surge, the demand for network capacity is heading to a bottleneck for carriers, especially with the growth of mobile video thanks to services like Netflix, YouTube, Hulu and a plethora of other video and music streaming services. To solve this problem, the Federal Communications Commission (FCC) will be auctioning the 600 MHz spectrum by the end of March, which was previously being used by TV networks and now will be switched to mobile carriers. Much has been spoken about the auction and it is expected to raise a considerable amount of money. Although the amounts are huge, a recent report from J.P. Morgan states that the money collected may be well below what was first expected.

Back in November analysts predicted that the auction could raise up to $35 billion, and recent reports by the bank reiterate these values, predicting the income between $25 to $35 billion, or $1 to $2 per MHz/POP (MHz per population, the standard unit for measuring spectrum prices). This is way below the 2.68 MHz/POP raised by the previous auction, called AWS-3 auction, which took place a year ago, making $45 billion in bids, and less than half the $70 to $80 billion estimated by more optimistic analysts. Some of the reasons for the drop in price are that the spectrum will not be usable for 3-4 years, and it may not be interesting for the majority of carriers. T-Mobile needs the lower frequency spectrum to increase their coverage, but AT&T and Verizon are not really interested in that as they need tight spectrum re-use. Additionally, Sprint is not taking part of the auction.

Even though the four major carriers aren’t likely to be fighting so fiercely for the spectrum, they will be paying between $21 to $30 billion, and there will be other players in the game. Comcast will be participating, but the company is not willing to spend that much money on it. One company is reported to be willing to pay as much as $10 billion, and private equity funds are expected to spend up to $2 billion. Until the auction happens, we won’t know for sure who will be playing, and other technology companies such as Google and Amazon could surprise everyone.