U.S. Spectrum Auction Breaks Record

Bids in the auction of broadband spectrum being held by the Federal Communications Commission (FCC), the U.S. regulator, had reached US $34 billion by the end of last week, more than tripling the reserve price of US $10.5 billion. (Since the bidding process is ongoing, the total this time is yet to be determined.) This auction, known as Auction 97, began on 13 November and represents the first time the FCC has offered formerly available blocks of spectrum in six years. The previous auction record, set in 2008, was $18.9 billion. The 65 MHz of spectrum being offered, known as AWS-3, includes two blocks in the 1695-1710 MHz band and two pairs of frequencies in the 1755–1780 MHz and 2155–2180 MHz bands. These frequencies are currently taken up by government agencies, including the military, and will not be immediately available for use by the winning bidders. Over 70 entities are participating in Auction 97, including AT&T, Verizon Wireless, T-Mobile US, Puerto Rico Telephone Company, DoCoMo Pacific, Teleguam Holdings and Dish Network.

The stratospheric sums being bid in this auction—for example, US $1.96 billion for a block of paired frequencies covering the greater New York City area—testify eloquently to the intensity of the demand for mobile broadband in the U.S. In order to accommodate this exponentially increasing demand, providers must acquire new spectrum. To make that spectrum available, the FCC had to persuade government agencies to give up some of theirs and release it for private-sector use. The fact that the frequencies being offered are at the high end has not dissuaded the bidders, despite the fact that high-frequency electromagnetic waves are less effective at penetrating buildings than lower-frequency waves. The higher frequencies’ ability to carry large amounts of data would appear to offset that disadvantage, at least to some extent. Even the fact that the winning bidders will have to wait an indefinite period of time before being able to develop their spectrum blocks failed to put a damper on the auction. “Years of hard work paved the way” for the auction, “and ongoing bidding appears to signal considerable commercial interest in this spectrum,” said FCC chairman Tom Wheeler, and assistant secretary of commerce Lawrence E. Strickling, in a joint statement.

The auction takes place at a time when President Obama is urging that strong net neutrality rules be implemented and applied to mobile operators. Concerns over such restrictions and their possible impact on revenue have also failed to tamp down the enthusiasm for purchasing spectrum. The reason, it is clear by now, is that nothing but more and more spectrum will enable providers to keep up with consumers’ demand for high-speed data and increasingly sophisticated services and content.

The above item appeared in a recent issue of Tarifica's "The Story of The Week", a weekly report that analyzes noteworthy developments in the telecoms industry from around the world. For past issues or to learn more about The Story of The Week or to contact the Tarifica Research department:  http://www.tarifica.com/contactus.aspx