CBRS auction inches toward $600 million after round 8

New Street Research says the CBRS auction isn't about the price of spectrum, but rather whether it enables new disruptive business models. (Getty Images)

After eight rounds of bidding, gross proceeds at the FCC auction for Priority Access Licenses (PALs) in the CBRS band inched toward $600 million, with Wednesday morning’s first round adding about $37 million in incremental bids.

There are still two rounds to go on Wednesday, as the format shifted to three, hour-and-a-half rounds per day. Gross proceeds in Auction 105 stood at $591,447,541, with demand still outpacing supply in many markets at the end of round eight.

However, the auction for spectrum in the shared 3.55-3.65 GHz band is different from earlier auctions and analysts at New Street Research believe the ultimate aggregate amount raised is less of an indicator of success than more subtle factors.

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RELATED: CBRS auction starts off strong, with high demand in first round

“The CBRS auction is not about how much the spectrum is worth,” New Street’s Blair Levin wrote in a weekend note to investors. “It’s about whether there are new disruptive business models for niche services.”

The unique sharing paradigm of the Citizens Broadband Radio Service (CBRS) band includes three tiers of users, with PALs in the middle – below federal incumbents and above General Authorized Access (GAA) use. The latter is already available for commercial use.

RELATED: CBRS private network put to the test by Utah school district

In Auction 105 there is 70 MHz of spectrum at play licensed on a county basis, with 22,631 in total. Each PAL consists of an unpaired 10 MHz block, and licensees can aggregate up to four PAL channels within any county area at any given time. The FCC said it represents the most-ever flexible-use licenses available in a single auction. The auction also presents an opportunity for non-traditional and smaller players to get in on the action and there are 271 qualified bidders.  

At the end of Round 8, the nationwide price per MHz POP was $0.031578, according to tracking by BitPath COO Sasha Javid. 

While price might not be the star of the show, demand in early rounds has been on par with earlier auctions. After round 8 there were still 1,011 county areas out of 3,233 with greater demand than supply.

Javid’s data shows the five counties with the largest excess demand after round 8 include Los Angles; Fulton, Georgia; San Juan, Puerto Rico; Lea, New Mexico; and Arlington Virginia. Excess demand for Los Angeles stands at 25, with the next three counties at 24, and excess demand in Arlington at 22 – versus supply of just seven for each county. Out of the 20 counties with the most excess demand, the remaining 15 all had at last 20 above supply.

RELATED: CBRS ratchets device support for 5G spec as auction kicks off

New Street over the weekend said that the excessive demand in earlier rounds points to potential for increased disruption ahead. The firm acknowledged that early bidding is not a definite indicator of where demand will ultimately land, but said the first rounds suggest that unique aspects of CBRS, including lower power limits and sharing “are not, at least so far, suppressing demand,” Levin wrote.  

Raymond James analyst Ric Prentiss expects that slow incremental bids in early rounds will pick up pace in the coming weeks, noting excess demand in counties with over half of the U.S. POPs.

Estimates on the final proceeds tally vary, and while Raymond James acknowledged predicting the final price is difficult, the firm pegged Auction 105 at generating between $8 billion and $10 billion.

RELATED: CBRS PAL auction poised to emerge a doozy, possibly raising $10B

New Street, meanwhile, has a much lower base forecast of around $3 billion.  

The firm noted that it's unlikely CBRS will be used for broad regional or national services but that it gives niche providers opportunities for low-cost spectrum, and traditional providers the option to get less expensive mid-band spectrum to augment their existing services.  

Verizon has already been deploying 3.5 GHz in a number of markets using the GAA portion of the band. Cambium Networks, meanwhile, this week said that around 20,000 of the company’s CBRS devices have already been deployed across more than 150 service provider customers. Cambium cited fixed wireless as the leading use case for deployments of its CBRS devices.

Usual suspects including major carriers are among qualified bidders in Auction 105, as are some cable operators, along with non-traditional bidders like Chevron, Deere & Company, and Duke University Health System.  

RELATED: Verizon’s CBRS 3.5 GHz deployments on the rise – RootMetrics

As for metrics that are more likely than price to show the ultimate importance of the auction, New Street cited, “the extent to which incumbents can use shared spectrum to reduce their cost structure, cable can use CBRS to provide their own wireless services, and new providers who control specific areas, such as universities and office park owners, can use the spectrum to offer niche services.”

Another important piece is the C-band auction, which is set to kick off December 8, with 280 MHz of licensed mid-band spectrum on the table.  That’s largely seen as a more key auction for major carriers as they need more mid-band spectrum to build out 5G and the C-band auction offers large channel sizes ranging from 20 MHz up to 100 MHz. Verizon in particular is largely expected to bid aggressively.

With C-band coming up soon, New Street said mobile carriers might not bid as heavily in the ongoing CBRS auction than if the former was on a more distant timeline.  

“In light of these factors, the aggregate number may not reflect the true, long-term impact of the [CBRS] auction,” Levin wrote.

Compared to its $3 billion estimate for the CBRS auction, New Street thinks C-band could generate around $52 billion.

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