700 MHz Auction Wraps Up
On Tuesday March 18, the FCC announced that the much-ballyhooed 700 MHz frequency auction had come to a close, having raised roughly $20 billion for the US Treasury. While the winning bidders have not yet been announced and the bidders themselves are forbidden from making public comments for several weeks, the rumor mill has been running overtime.
On Tuesday March 18, the FCC announced that the much-ballyhooed 700 MHz frequency auction had come to a close, having raised roughly $20 billion for the US Treasury. While the winning bidders have not yet been announced and the bidders themselves are forbidden from making public comments for several weeks, the rumor mill has been running overtime.Before we get to the rumors, let's review the facts. The total bids came to $19.6 billion, though the price bidders were willing to pay varied widely. The most restrictive licenses were in the D Band, where the winners would have to share that spectrum with public safety agencies. None of the bids met the FCC defined minimum, and it will have to offered again.
The results for the much anticipated C Band were almost as bad. The requirement for C Band bidders was that they would have to deploy services that utilized "open access" as opposed to carrier-defined devices. The band did sell for $4.75 billion, just $150 million (3%) above the FCC-defined minimum. It seems fairly clear that the businesses who are putting up this kind of cash place value on the idea of owning those frequency assets free and clear. In the free market, encumbrances reduce the value of the asset.
Now for the rumors- who won. The biggest speculation surrounded Google's participation, but the early rumors indicate that Google is going away empty handed. The big winners, not surprisingly, appear to be the incumbent cellular carriers, AT&T and Verizon. Are we seeing a pattern here? The frequency bands that sell for the highest prices are the ones that will allow the winner to deploy services with whatever restrictions they care to include. That's not to say that the cellular carriers may not choose to move away from their traditional walled-garden approach to wireless services, but they appear to have paid top dollar to keep the decision in their own hands.
My big prediction is that Google now buys Sprint's WiMAX Xohm network (if not the entirety of Sprint) as well as buying out Craig McCaw's stake in Clearwire. With Google's stratospheric stock price, this is probably the best and cheapest way to get into the wireless business. I've observed before that the idea of Google buying spectrum and trying to develop a wireless network service from scratch would be foolish. Buying all of Sprint, or just the WiMAX business, they get the expertise they'll need to build and operate a wireless network as well as Sprint's and Clearwire's extensive holdings in the unencumbered 2.5GHz BRS band.
There are pros and cons with both 700 MHz and 2.5 GHz. The obvious advantage of 700 MHz is the loss characteristics, as a 700 MHz signal will travel about 4-times as far as a 2.5 GHz signal with a similar amount of loss. That means you can build a 700 MHz network with far fewer base stations. However, there's a lot more 2.5 GHz spectrum. The BRS band is 195 MHz, though it is unclear how much of that Sprint and Clearwire actually hold. The entire spectrum being offered in 700 MHz band was only 84 MHz, and that is carved into a number of bands ranging in size from 2 MHz to 22 MHz. Most of those are subdivided into channel pairs that are separated by intervening bands.
The other factor to bear in mind with 700 MHz is the impact on the size of the products that incorporate it. I've read countless articles that waxed eloquent on the loss characteristics, but never mentioned that a 700 MHz signal has wavelength around 21-inches, which requires a 5-inch antenna! If we use MIMO, the antenna elements must be ½ wavelength apart, so now we're talking about a device with a minimum dimension of 10.5-inches; that thing's not fitting in your pocket!
The last point to mention is that nothing is going to happen for a few years in any event. Even if the bidders have developed business plans, it's still going to take time to put those plans into action, and building networks takes time. The starting gun has sounded, now the race begins.