Editor’s Corner—600 MHz incentive auction ‘extravaganza’ ends with a whimper

As noted by Wells Fargo, the nation's top wireless operators use a range of different spectrum bands. (Wells Fargo)

Remember when former FCC Chairman Tom Wheeler promised a "spectrum extravaganza" with the agency’s incentive auction of TV broadcasters’ unwanted 600 MHz spectrum licenses? Well it turns out that T-Mobile is now the only major nationwide wireless carrier that’s actually using those licenses.

Sprint never participated in the auction, Verizon said it would participate but then ended up not buying anything and AT&T just inked a deal to sell off all of its remaining 600 MHz licenses.

That’s a pretty mediocre ending to a major effort by American regulators to free up more spectrum to carriers that were arguing that there wasn’t enough spectrum to meet demand, and that wireless networks could slow to a crawl as a result. The incentive auction largely sprang from Congress’ National Broadband Plan in 2010, which tasked the FCC with conducting a first-of-its-kind of auction that paid TV broadcasters to relinquish their 600 MHz licenses so that wireless carriers and others could buy them in an auction.

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The “incentive” auction was described as the last time spectrum seekers would be able to purchase large chunks of “beachfront” low-band spectrum. The propagation characteristics of 600 MHz spectrum allows signals to travel longer distances and penetrate buildings better than higher bands like 1800 MHz.

Expectations were high for the incentive auction. Prior to the start of the auction, Moody's predicted it could generate as much as $60 billion in winning bids. After all, AT&T said in 2014 it would purchase between 20 MHz and 40 MHz of spectrum in the auction.

But the auction only ended up generating roughly $20 billion in winning bids. Verizon surprised just about everyone by purchasing nothing. AT&T purchased around $1 billion worth of licenses, but it is now selling all of those licenses—analysts believe it’s because AT&T no longer needs that low-band spectrum because it is getting FirstNet’s 20 MHz of nationwide 700 MHz spectrum.

T-Mobile was the big spender during the incentive auction, dropping around $8 billion on licenses around the country. (That figure was surprisingly close to the maximum $10 billion T-Mobile said it might spend.) And just this month, T-Mobile said its 600 MHz coverage is now live in 586 cities, and that it will launch more than 12 new 600 MHz-capable smartphones in 2018.

Other major incentive auction winners included Dish Network, Comcast and U.S. Cellular. U.S. Cellular will likely build out its 600 MHz holdings, but it’s unclear whether Dish and Comcast will actually use theirs. Dish has promised to build an NB-IoT network using its vast spectrum holdings, but NB-IoT technology is specifically designed to only need tiny amounts of spectrum, so it’s the equivalent of Dish wielding a nuclear weapon in a knife fight. And Comcast could well use its 600 MHz holdings for its Xfinity Mobile or machineQ efforts, but the company hasn’t said a word about its plans.

So what does all this mean? It means that wireless carriers like Verizon are increasingly using advanced wireless technologies (think advanced MIMO, LAA, small cells and carrier aggregation) to do more with their existing spectrum holdings. It also means that carriers today have more spectrum options than they did in 2010, considering the FCC may soon release more 3.5 GHz spectrum via its ongoing CBRS proceeding.

But mostly it means that wireless is changing from a coverage game to a capacity game. 600 MHz is an excellent choice of spectrum to coverage large geographic areas, and that’s exactly how T-Mobile is using it. But it’s not necessarily what most carriers are looking to do today. Today, carriers are trying to figure out ways to increase the amount of data their networks can handle in dense urban areas, where their existing wireless customers want better, faster services.

Enter 5G. One of the key elements of 5G is that it can make use of millimeter-wave spectrum bands, or those above 28 GHz. Due to its propagation characteristics, millimeter-wave spectrum transmissions can support huge amounts of data across very short distances.

Indeed, even as AT&T sells its 600 MHz holdings its working on buying millimeter-wave spectrum from FiberTower.

And what does this mean for T-Mobile? As the country’s only major 600 MHz supporter, T-Mobile now faces an uphill climb because it will need to convince device makers and network equipment suppliers to specifically support its own spectrum holdings. That’s probably not a huge challenge given T-Mobile’s momentum in the market, but it’s still an issue. (To be clear, it’s an issue other operators face too; for example, Sprint is the nation’s only major carrier with 2.5 GHz holdings.)

But I think the real conclusion here is that wireless is a fast-moving game, and players’ needs and strategies can quickly change from one year to the next. Ajit Pai, you’ve been warned. – Mike | @mikeddano