FCC launches new 5G mid-band wireless spectrum auction (FCC Auction 108)
The U.S. Federal Communications Commission (FCC) said Friday it had opened bidding in its latest mid-band spectrum auction (FCC Auction 108) to boost next generation 5G wireless services. The new round will auction about 8,000 county-based licenses in the 2.5 GHz spectrum band in mostly rural parts of the U.S. FCC Chairwoman Jessica Rosenworcel said Friday, “We all know there are gaps in 5G coverage, especially in rural America, and this auction is a unique opportunity to fill them in.”
Auction 108, which started at 10am ET on Friday, July 29, utilizes a “clock-1” auction format. This format is similar to the clock phase of past FCC auctions, but rather than offering multiple generic spectrum blocks in a category in a geographic area, it will offer only a single frequency-specific license in a category in a county.
The U.S. Congress last year approved $42.5 billion for Commerce Department grants to expand physical broadband deployment in places like rural areas without access to high-speed service. The FCC has been auctioning spectrum in recent years to help address the rising demand for wireless connectivity as the number of internet-connected devices rises sharply.
In January, AT&T Inc led bidders in the 3.45 GHz mid-band spectrum auction, winning $9.1 billion, while T-Mobile won $2.9 billion and Dish Network spent $7.3 billion. In 2021, the three largest U.S. wireless companies won $78 billion in bids in an FCC C-Band spectrum auction. Verizon Communications ultimately paid $52 billion for 3,511 licenses and to quickly clear its use, while AT&T won $23.4 billion in licenses and T-Mobile won $9.3 billion.
FCC Commissioner Brendan Carr in March said the FCC should move to expand spectrum use and consider auctioning other spectrum including looking at the “Lower 3 GHz band and several additional spectrum bands.”
In February, the FCC and National Telecommunications and Information Administration (NTIA) vowed to improve coordination on spectrum management after a 5G aviation dispute threatened flights earlier this year. The agencies said they will work cooperatively to resolve spectrum policy issues and are holding formal, regular meetings to conduct joint spectrum planning.
Here are the (disappointing) results of FCC Auction 108:
FCC Auction 108 (2.5 GHz) ends with total proceeds << than expected; T-Mobile expected to be #1 spectrum buyer
3 thoughts on “FCC launches new 5G mid-band wireless spectrum auction (FCC Auction 108)”
Mike Dano, Light Reading:
There appears to be very little interest in the FCC’s newest auction of midband spectrum for 5G, based on the results of Monday’s second round of bidding. Gross proceeds in the auction – dubbed Auction 108 by the agency – so far total around $108 million.
That figure is up just slightly from the $103 million in total first round bids placed on Friday, the first day of the auction. “Demand at the start of this auction is very tepid,” argued Sasha Javid, chief operating officer for BitPath, on LinkedIn after the first round of bidding. Javid has closely tracked previous FCC auctions, and maintains a detailed website for Auction 108.
As noted by Telecompetitor, most 2.5GHz spectrum licenses around the country did receive bids during the auction’s first round. However, more than half of the 8,000 licenses up for grabs received just one bid – an indication of relatively lackluster competition for spectrum.
The spectrum guessing game
That’s not necessarily a surprise though. Most of the licenses in the auction are relatively narrow geographically and spectrally, and are scattered throughout the country in primarily rural areas.
“It’s a queer collection of licenses, which makes estimating its value hard,” wrote the financial analysts at New Street Research in a note to investors over the weekend. They said they expect the auction to end in September with around $3.4 billion in winning bids, “with substantially all of the licenses going to T-Mobile.”
The relatively sluggish bidding in the FCC’s 2.5GHz midband spectrum auction is particularly noteworthy in light of the $19 billion generated by a recent midband 5G spectrum auction in India. As noted by TechCrunch, Reliance Jio Infocomm accounted for the bulk – around $11 billion – of those bids.
Indeed, the FCC’s Auction 108 appears on track to be the agency’s smallest midband spectrum auction for 5G ever. The agency’s CBRS auction of 3.5GHz licenses raised $4.6 billion in bids from a range of bidders in 2020. More recently, the FCC’s Andromeda auction of 3.45GHz licenses ended earlier this year with a total of around $22 billion in winning bids. And of course, the FCC’s record-breaking C-band auction ended in 2020 with a whopping $81 billion in winning bids.
An auction for T-Mobile
There are several reasons the FCC’s newest midband auction of 2.5GHz spectrum licenses doesn’t appear to be drawing much interest. First, two important groups of bidders – cable companies and investment firms – are missing from the event. Second, Verizon, AT&T and Dish have already spent heavily in other auctions, which will likely dampen their interest in Auction 108.
But perhaps most importantly, T-Mobile is the only major wireless network operator that is building a 5G network with 2.5GHz spectrum licenses. All other operators, from Dish to Verizon, are investing in other spectrum bands. That would make it relatively easy for T-Mobile to add more 2.5GHz spectrum to its network, and it would make it much harder for others to do the same.
“This auction is really all about T-Mobile,” Javid wrote.
More broadly though, there are a few other important issues hanging over the FCC’s 2.5GHz spectrum auction. For example, it will likely be the last one for at least the next few years.
Nothing on the horizon
“There are no further auctions scheduled in the US,” wrote the New Street analysts. “The next band to come up will probably be a block of DoD [Department of Defense] spectrum that sits below 3.45GHz. The auction for that spectrum is at least half a decade away. By the time it is auctioned, the industry will be focused on 6G, or whatever comes next.”
Another outstanding item is the FCC’s legal authority to auction spectrum. Rules formalizing that authority are expiring in September, and it’s unclear whether Congress might address the situation.
Finally, as noted by the New Street analysts, there’s legislation wending through Congress that could affect operators’ financial calculations around spectrum. Specifically, the proposed Inflation Reduction Act could impact the tax benefit operators get from the amortization of their spectrum licenses. “This wouldn’t just impact tax deductibility for future auctions; the carriers may lose tax benefits on the $108 billion they invested in the recent 3GHz auctions, as well as any spectrum acquired since 2007 (until now, the carriers have been allowed to amortize spectrum over 15 years),” the analysts wrote.
It’s not clear whether the Inflation Reduction Act will pass through Congress. And if it does, it’s not clear whether the final version will affect 5G spectrum.
T-Mobile spent $304 million in FCC auction 108, and it won 90% of all the licenses sold or 7,156 of the 7,872 total licenses that received winning bids. The auction offered up a total of 8,017 licenses in mostly rural locations around the country, but not all of those licenses received winning bids.
“With most of the available spectrum in the 2.5GHz band located in rural areas, this auction provides vital spectrum resources to support wireless services in rural communities,” according to the FCC.
T-Mobile was widely expected to bid heavily in the auction, considering it is the only big wireless network operator that uses the 2.5GHz spectrum band. Moreover, other operators like Verizon, AT&T and Dish Network have spent heavily in other FCC spectrum auctions, leaving them with little financial firepower to chase 2.5GHz spectrum.
However, the FCC’s 2.5GHz auction generated far less interest among bidders than most analysts had expected. Before the auction started in late July, estimates ranged from $1 billion to $5 billion in total bids. But when the auction ended earlier this week, it generated just $428 million in total bids. Thus, T-Mobile accounted for roughly 71% of all spending in the auction.
Other big spenders in the auction include PTI Pacifica ($18 million); TeleGuam Holding ($17 million); and Evergy Kansas Central ($13 million).
T-Mobile will undoubtedly use its auction winnings to expand the rural growth strategy it laid out in recent years.
This is just the latest batch of spectrum licenses T-Mobile has purchased in recent years for its 5G network. Aside from the vast 2.5GHz holdings it acquired via its $26 billion purchase of Sprint in 2020, T-Mobile also spent around $10 billion in the FCC’s recent C-band auction, $3 billion in the FCC’s 3.45GHz auction earlier this year and $3.5 billion for 600MHz spectrum licenses from Columbia Capital in a deal announced last month.
T-Mobile won more than 7,000 county-based licenses covering 81 million POPs in the FCC’s 2.5 GHz auction and plans to deploy as quickly as possible, it said. “This new spectrum will enable T-Mobile to expand Ultra Capacity 5G coverage to new communities and significantly increase bandwidth in many places Ultra Capacity 5G already covers,” said a Friday news release: “Following licensing, the Un-carrier will immediately begin deploying the new spectrum for 5G, boosting performance for customers across the country, especially in underserved markets.”