700 MHz Winners Announced700 MHz Winners Announced
In my post on the conclusion of the 700 MHz auctions last week I reported the rumor that Google was not among the winners. When the winners were announced two days later, that rumor was indeed confirmed. Now that we've had a couple of days to wade through the results, a few interesting patterns have emerged.
March 25, 2008
In my post on the conclusion of the 700 MHz auctions last week I reported the rumor that Google was not among the winners. When the winners were announced two days later, that rumor was indeed confirmed. Now that we've had a couple of days to wade through the results, a few interesting patterns have emerged.
In my post on the conclusion of the 700 MHz auctions last week I reported the rumor that Google was not among the winners. When the winners were announced two days later, that rumor was indeed confirmed. Now that we've had a couple of days to wade through the results, a few interesting patterns have emerged.The biggest buyers were Verizon and AT&T, the two major cellular carriers. Together they invested $16.27 billion or 83% of the total take. The other national cellular carriers, Sprint and T-Mobile, bought nothing. T-Mobile stocked up on spectrum to the tune of $4.6 billion in the AWS auction in 2006, and Sprint is sitting on a major swath in the 2.5 GHz band that they hope to use to for their mobile WiMAX service- if they can come up with the money to build the network.
However, AT&T and Verizon approached the auctions with very different strategies. AT&T spent $6.64 billion and focused on the restriction-free 12 MHz B Block; they grabbed 227 out of 734 licenses covering areas across the country. AT&T's views on openness seem to reflect the KGB's opinions on glasnost.
Verizon was the biggest spender, dropping a total of $9.63 billion. Roughly half of that went for those restriction-free A and B Block licenses, but they also bagged most of the licenses for the much discussed C Band. The requirement for C Band bidders was "open access", where any network built on these airwaves would have to be open to any device and any application. That requirement was instituted based largely on Google's aggressive lobbying efforts last summer.
While free enterprise may have triumphed, the US Government took it on the chin. The open access and other use restrictions clearly drove down the prices. Verizon got the C Block licenses for $4.75 billion, just 3% above the FCC-defined minimum. The most restrictive licenses were in the D Block, where the winners would have to share that spectrum with public safety agencies. None of the bids received met the FCC-defined $1.3 billion minimum. That spectrum will have to offered again, possibly with a different set of regulations.
The basic measure of radio spectrum value is cost/MHz/Pop, or the cost of 1 MHz of radio spectrum covering a population of 1 million people (you might hear other definitions of that measure, but this is the real one). According to RBC Capital Markets, the average cost per MHz/Pop for the unencumbered A and B Blocks were $1.17 and $2.24 respectively, while the C Block was 76 cents. It seems fairly clear from the C and D Block results that in a market process, encumbrances reduce the value of the asset.
Among the other winners were Dish Networks (bidding as "Frontier Wireless") and Qualcomm. They split the 6 MHz E Block (what used to be UHF channel 56), with Qualcomm buying the major markets and Dish taking the smaller ones. Qualcomm was a winner in one of the earlier 700 MHz auctions when they acquired the nationwide licenses for the 6 MHz that was channel 55, and they are apparently looking to beef up the capacity of their floundering MediaFLO mobile video service.
Conclusion This will probably be the last major spectrum story for a while; the FCC doesn't have much to sell at the moment. While those of us who track the machinations of the wireless industry have been following the 700 MHz saga closely, it will be a couple of years before users see any significant new offerings in the wireless space. The carriers will have to decide what they want to provide, standards for those services will have to be developed, equipment manufacturers will have to build the infrastructure elements, and then we can finally start doing something.
We'll keep you posted on the developments, but you will definitely have time to get your tomato plants in before anything happens on the 700 MHz front.
