A letter from the C-Band Alliance (CBA) on Friday that said its auction plan, including significant contributions to the U.S. Treasury, appears to be a case of too little, too late, according to analysts at New Street Research.
The letter (PDF) stated that if the Federal Communications Commission (FCC) adopts the CBA proposal for a CBA-led auction of mid-band spectrum for 5G, the CBA will commit to pay a portion of net proceeds to the U.S. Treasury using a progressive formula that ranges from 30% to 75% of proceeds depending on the outcome of the auction. The CBA also said it’s talking to members of Congress about a fund for the deployment of an open access 5G network for rural broadband, which may include a combination of spectrum and capital contributions.
“While CBA attempted to resuscitate its plan with a specific offer to transfer funds to the Treasury, we think that effort will likely fall in the category of too little, too late, as the FCC moves in towards an FCC-run auction with more proceeds likely to go to the Treasury,” wrote New Street Research analyst Blair Levin in a 13-page note to investors over the weekend. “CBA, however, retains significant leverage and is still in a position to achieve much of their original goal.”
One of the big pitfalls for the alliance appears to be the arrival on the scene of Senator John Kennedy, a Republican from Louisiana who has adamantly opposed the CBA’s plan, saying it would give foreign-owned satellite companies a windfall. While he didn’t appear to gain traction in a hearing with fellow senators, he seemed to be playing the Trump card, and may have gotten the ear of the president.
The New Street analysts say they suspect a call took place between the two parties, but they can’t be certain.
Regardless, Levin’s team no longer expects an FCC order in December, or publication of a draft this week, but more likely, a clarification statement this week claiming that significant progress has been achieved—such as consensus for 300 megahertz being reallocated and principles for an auction—and that early in 2020, the full commission will get an order to consider detailing both a plan for moving forward and a number of questions. That plan likely would be subject to a relatively quick public comment period and enable the commission to provide a detailed path forward, resulting in an FCC auction late in 2020.
Of course, where it goes is anybody’s guess, but Verizon and AT&T certainly are interested in the outcome, as both want to see mid-band spectrum for 5G come to market but they have different points of view on the CBA plan and how the C-band spectrum gets to auction. T-Mobile also has been an active participant in the proceeding.
Analysts at Wells Fargo Securities noted that the CBA’s letter on Friday came after much speculation, though not confirmed, that the FCC was moving away from leaning toward a private transaction (where the FCC would have some involvement), and moving more toward a public auction, but there has been no official comment from the FCC.
“While we do not know, we expect the carriers (likely with VZ leading the way) to be working with the CBA to push this plan. We agree that timing is of the essence, if the FCC is not able to settle on a plan in 1H 2020, the window likely gets closed as we get through the November 2020 Presidential election,” wrote Wells Fargo analyst Jennifer Fritzsche in a note to investors.