The end of the FCC’s incentive auction of 600 MHz airwaves in the next few weeks could lead to “an unprecedented wave of spectrum dealmaking,” MoffettNathanson analysts wrote this morning. But the emergence of new technologies and network architectures has cast some doubt over just how valuable spectrum has become.
The ongoing auction has forestalled potential spectrum deals due to its anticollusion rules, which prevent negotiations by wireless companies and broadcasters that could influence bidding in the auction. Those rules will be lifted in the next several weeks, though, enabling carriers to reengage in talks among themselves as well as with companies looking to break into the mobile market.
And companies that are sitting on significant spectrum portfolios are likely to be targeted by carriers and would-be service providers.
“We are about to enter a phase where spectrum valuation is of paramount importance. When the incentive auction finally concludes in late April, the window will open on what many expect to be an unprecedented wave of spectrum dealmaking,” MoffettNathanson analysts wrote in a lengthy report sent to investors this morning. “The Prom Queen of all spectrum takeout candidates is widely regarded to be Dish Network and its trove of AWS spectrum, but other spectrum candidates feature prominently as well: Ligado, Globalstar, Straight Path and even Sprint. And there are new sources of spectrum coming in 3.5 GHz, 5 GHz and millimeter wave frequencies, all of which promise even more capacity.”
Increasing capacity has certainly become a top priority for carriers as mobile data consumption continues to soar. And that trend will only grow as operators begin to roll out 5G services and provide connectivity for an ever-increasing variety of devices.
Spectral efficiency has increased significantly in recent years though, thanks to the emergence of technologies such as carrier aggregation, MIMO and QAM, MoffettNathanson noted. Carriers may be “approaching the theoretical limit of spectral efficiency,” the firm said, which could mean that the redeployment of spectrum they already own could become more important than acquiring new airwaves.
“Ultimately, our analysis suggests that so-called ‘spectrum reuse’ strategies will therefore necessarily be the next, and perhaps the primary, means of adding incremental capacity in the future, though a combination of continued advances in MIMO (which also increases spectral efficiency), and also through additional cell sites, which we imagine will be predominately through small cells,” the analysts wrote. “Network densification sets us up nicely for 5G, a next-generation standard that will not only use the traditional frequency bands but also aggregate them with hundreds of MHz of millimeter wave spectrum.”