How Much Will Verizon, AT&T, T-Mobile And Others Spend On 600 MHz Spectrum?

On this week’s Carrier Wrap, RCR Wireless News Editor-in-Chief Dan Meyer and Berge Ayvazian, senior analyst and consultant at Wireless 20/20, dive into the participation landscape ahead of the Federal Communications Commission’s kick off of its highly anticipated 600 MHz incentive auction proceedings.

The process began with television broadcasters making their initial bid commitments by end of day on March 29, which the FCC will then use to begin the reverse auction aspect of the proceedings. The reverse auction will determine the price at which broadcasters will voluntarily relinquish their spectrum usage rights in the 600 MHz band.

Television broadcasters interested in giving up some of their current spectrum holdings in the 600 MHz band had until Jan. 12 to file an application with the FCC, with a statement from the National Association of Broadcasters indicating “robust” participation from television broadcasters.

Ayvazian noted 2,166 of the country’s approximately 8,500 TV stations were eligible to participate in the auction, including some big names that threw their hat in the ring like CBS, Comcast, NBCUniversal and Univision. Ayvazian cited a recent research study by Wharton professors Ulrich Doraszelski and Michael Sinkinson showing there is a way for some TV station owners to take advantage of the system and increase their sales gains by potentially billions of dollars. It was also noted that three private equity firms have been actively acquiring TV stations of a certain type in recent years, getting into bidding wars over stations that seemed to be not too valuable otherwise.

The reverse auction process is expected to take anywhere from three weeks to two months, at which point the FCC will take a break in the proceedings to repackage the spectrum offered up by the broadcasters into chunks that can be used by commercial cellular providers. Analysts predict the FCC could have between 80 megahertz and 110 megahertz of spectrum available for the auction’s more conventional forward auction process.

“The lynchpin joining the reverse and the forward auctions is the ‘repacking’ process,” the FCC noted. “Repacking involves reorganizing and assigning channels to the remaining broadcast television stations in order to create contiguous blocks of cleared spectrum suitable for flexible use. The vast majority of stations that remain on the air after the auction will be assigned channels in the TV band; in a few markets where the post-auction TV band is not large enough to accommodate every station, stations may be assigned a channel in the wireless band.”

Of the 104 companies registered to participate in the proceeding’s forward auction, Ayvazian said he expects AT&T to be most aggressive, spending as much as $10 billion on 20 megahertz of nationwide spectrum. Verizon Communications is forecast to spend around $5 billion, having previously cited interference concerns with its current low-band 700 MHz spectrum licenses. T-Mobile US is expected to dominate bidding in the so-called “reserved” spectrum, with predictions of around $8 billion in total bids.

Ayvazian added he expects a tier-two and tier-three carriers like U.S. Cellular, C-Spire and Cellcom to be selective in their bidding approach, targeting licenses in areas they currently serve.

As for a potential “dark horse” bidder, Ayvazian said he does not expect any one entity to emerge with significant spectrum from the auction, noting Google has already said it won’t participate and Dish Network’s bidding entity is not able to receive bidding credits. He did note Comcast could be a surprise if it’s looking to add a “canopy” layer of coverage for its current Wi-Fi calling plans.

Overall, Ayvazian said he expects total bids to come in around $35 billion or so, though in recent weeks has begun to increase his expectations.

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