The recently completed FCC H Block auction served to tee up two more auction processes in the US – AWS-3 and 600 MHz. The H Block process ended at exactly the reserve price after 160 rounds, with DISH Network winning all of the licenses. DISH Network had promised to ensure the auction met the reserve price – so mission accomplished.

But with only 23 bidders in the H Block auction – a marked decline from 214 in the 2008 auction of 700 MHz licenses, and with none of the Top 4 carriers participating – there was no other large bidder present to challenge DISH. Had there been other competitors bidding, would DISH have continued bidding above reserve price or would DISH have dropped out? Inquiring minds may want to know, but the conclusions for the competitive landscape in the US remain unclear…

Unlike H Block, AWS-3 is clearly new “core” mobile spectrum. If it is only the largest carriers that acquire it, then their relative market weighting is likely to continue to increase, further marginalizing smaller carriers.

We believe that the AWS-3 Auction is a key opportunity for all carriers because:

  1. AWS-3 is an opportunity to secure important 4G capacity pre-600 MHz. AWS- 3 comes with a certainty of 50 MHz of paired frequencies nationwide, contrary to the Incentive Auction.
  2. With lottery tickets, the only way to win is to buy a ticket. In the licensed spectrum world, the only way to win is to buy a license. And the least expensive way to buy licensed spectrum assets is in the FCC auction processes, where prices are typically lower than in the secondary market.

Furthermore, success in AWS-3 in revenue terms will further lower the pressure on revenues from the Incentive Auction for the FCC by adding to the funds available for FirstNet.

In 2006 the AWS-1 auction raised US$13.7 billion with 104 bidders participating. It introduced 90 MHz into the market, increasing core mobile capacity by 47%. This was in a pre-iPhone world where the term “mobile broadband” was only a nascent idea.

Now in 2014, not only is AWS-1 a proven band, but it is also a workhorse of LTE deployment notably for T Mobile, but also soon to be for Verizon and AT&T.

AWS-3 – 1755-1780 MHz paired with 2155-2180 MHz – is contiguous with the existing AWS-1 licenses, and the FCC requires that devices work across the entire range. The FCC has decided to award 40 MHz based on large Economic Areas as well as one 10 MHz license focused on the much smaller Cellular Market Areas (CMAs), favored by regional carriers. The auction will also include 15 MHz of unpaired spectrum in 1695-1710 MHz, i.e. adjacent to the lower frequencies of AWS-1.

So the AWS-3 auction will have something for everyone.

With mobile penetration over 100% of the population and mobile data usage continuing to grow at >50% per year (per Cisco), added spectrum resources are increasingly strategic to the long-term viability of wireless businesses.

Spectrum capacity is a proxy for market share. Without one, you will not have the other. While the amounts vary by market, AT&T and Verizon hold 50% to 60% of the core mobile spectrum capacity – cellular, PCS, AWS and 700 MHz – and account for over 65% of mobile service revenues (per FCC 2012).