FCC kicks off H Block auction, with Dish as lead bidder

The FCC is launching its first significant auction of wireless spectrum in six years Wednesday, with the auction of the 1900 MHz PCS H Block, in a sparsely populated sale in which Dish Network (NASDAQ: DISH) is the lead bidder for the airwaves.

The commission has said 23 bidders have qualified to submit bids for the spectrum block. Dish has agreed to bid the reserve price of $1.56 billion in exchange for getting greater flexibility from the FCC to convert part of its 2 GHz AWS-4 spectrum from uplink to downlink operations. Dish has applied as "American H Block Wireless LLC" and many companies have applied under pseudonyms to mask their commercial names.

The H Block is a 10 MHz block of paired airwaves that runs from 1915-1920 MHz (for the uplink) and from 1995-2000 MHz (for the downlink). Dish controls spectrum adjacent to a portion of the H Block, called AWS-4; Dish's 40 MHz of AWS-4 spectrum specifically runs from 2000-2020 MHz (for the uplink) and 2180-2200 MHz (for the downlink). However, Dish asked the FCC to let it use the 2000-2020 MHz band for downlink operations instead of uplink.

For Dish, the auction is an opportunity to scoop up more spectrum at a relatively low price. Sprint (NYSE:S) and T-Mobile US (NYSE:TMUS) indicated in November they will not participate. Sprint had been considered a likely bidder since it controls spectrum adjacent to the H Block.

"Dish faces little competition for the H Block and should be able to buy another block of national spectrum at below-market prices," BTIG analyst Walter Piecyk told Bloomberg.

The list of bidders includes smaller carriers such as nTelos, Piedmont Rural and James Valley Cooperative Telecom, while the list of bidders with incomplete applications includes "Cellular South Licenses," which is likely affiliated with C Spire Wireless, whose name was formerly Cellular South. América Móvil is listed as a bidder as "Puerto Rico Telephone Company." Verizon Wireless (NYSE:VZ) and AT&T Mobility (NYSE:T) are not bidding.

The H Block spectrum will be auctioned in 176 individual Economic Areas across the country.  The proceeds of the auction will be used to build a nationwide public safety broadband network, though the H Block auction will only cover a small portion of the full cost of building that network.

The Tier 1 wireless carriers are more interested in other upcoming auctions. The FCC will also conduct an auction by early next year of AWS-3 spectrum, which could potentially pair the government-owned 1755-1780 MHz with 2155-2180 MHz band. Those airwaves are likely going to be coveted by all the carriers.

Additionally, the main event will likely be next year, when the FCC launches incentive auctions of 600 MHz broadcast TV spectrum. The FCC recently pushed the start date of those auctions to mid-2015 and is still developing the rules for them. However, because of the strong propagation characteristics of the airwaves, they will be highly sought after. The four Tier 1 carriers and Dish are estimated to spend at least $46 billion on spectrum in a series of auctions and smaller transactions over the next 24 months, according to the Wall Street Journal, citing analysts at New Street Research.

"It is the most significant and probably the most important one," John Stankey, chief strategy officer at AT&T, told the Journal. "We would like to participate in it very aggressively."

For more:
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Broadcasting&Cable article

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Analysts: Sprint, T-Mobile ditched H Block to focus on other spectrum, avoid Dish complications
Sprint abandons pursuit of H Block spectrum
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