Dish Network, Verizon Communications and cable companies such as Comcast, Charter and Cox Communications grabbed the headlines last week when the FCC announced the winning bidders in the recent auction of the Citizens Broadband Radio Services (CBRS) 3.5 GHz spectrum.
But I think the more compelling story to tell about the CBRS auction is what the smaller, non-traditional players that won just a few spectrum licenses in rural America might do with their licenses.
One of the big selling points of the CBRS auction was that it would enable new market entrants and smaller and rural operators to build networks at very attractive costs. If there’s any question as to whether this auction accomplished that goal, just take a look at the variety of companies that are among the winning bidders.
For example, Alyrica Networks, an internet service provider in Oregon’s mid-Willamette Valley, won 19 licenses and paid $1.36 million. Oil and gas firm Chevron USA purchased 26 licenses and paid $1.06 million. Deere & Company, the tractor manufacturing and technology company, purchased five licenses for $545,999. And LocaLoop Inc., which describes itself as a provider of rural 5G fixed wireless service in Minnesota, paid $5.8 million for 113 licenses.
Companies like Chevron and Deere & Company are expected to use their CBRS spectrum to build private LTE networks. Alex Besen, founder of the Besen Group, a consultancy group that has studied how different companies will use CBRS spectrum, predicts the industry will see many new business models develop as companies deploy private LTE networks using these licenses. “I think that we will see oil and gas companies start by deploying a private LTE network and then migrate to 5G when the time is appropriate,” Besen said. He added that each Priority Access License (PAL) is for a 10 MHz channel in the 3.5 GHz to 3.6 GHz band, which is enough to deploy 5G, especially for a private network.
How will these companies use their private LTE networks? It will probably vary depending upon the industry. For example, Deere & Company has indicated interest in providing high-speed connectivity for its manufacturing facilities and also for some of its customers. One possible scenario is that the company bundles connectivity with their equipment, similar to how computer manufacturers bundled their laptops with LTE several years ago.
And utility companies such as Alabama Power Company, which paid $18.9 million for 103 licenses, will likely build private LTE networks to support the electrical grid and provide IoT applications. Power companies have already been experimenting with private LTE networks in other spectrum bands. For example, Nokia recently announced that Ameren, which provides electricity to 2.4 million customers and natural gas to more than 900,000 customers, is trialing Nokia’s private LTE technology in the 900 MHz spectrum band in Missouri and Illinois for 14 different use cases, including security systems and supervisory control and data acquisition (SCADA).
Another potential business model may come from real estate companies. JBG Smith, a Washington, D.C., real estate investment firm, paid $25 million for seven CBRS licenses in the Washington, D.C./Arlington, Virginia area. Besen speculated that JBG may want to use its licenses to build a private LTE network and offer coverage and access to the network to its portfolio of buildings and real estate developments.
This particular business model could be particularly disruptive to wireless operators and broadband companies because if real estate firms, small cities, or even homeowners associations start offering wireless broadband services to their members, they could effectively cut the carriers out of the loop.
Rural operators and WISPs, meanwhile, will have a very different agenda for using their CBRS licenses. Many WISPs have already been deploying LTE in the CBRS spectrum using the unlicensed portion of the band. However, by using licensed spectrum they don’t have to worry about interference or sharing the band with any incumbent users. WISPs, which often provide wireless internet to underserved communities using WiFi in unlicensed spectrum, will benefit from deploying LTE in the CBRS band because it will provide them with a much larger potential customer base. LTE in the CBRS band offers better propagation than other bands so signals can travel much farther and also penetrate buildings.
Rural wireless operators, meanwhile, have a similar advantage because they can achieve better performance using the CBRS mid-band spectrum and with PAL licenses they don’t have to worry about sharing the band with any incumbent users. Also, using licensed spectrum means that some players could potentially generate roaming revenue from bigger operators such as Verizon. Since Verizon purchased numerous CBRS licenses, the operator will likely be incorporating support for the CBRS band in more of its handsets in the future.
These new CBRS licensees hold the potential to disrupt and grow the wireless market, which is exciting for the whole industry. But like other market disruptors, it’s possible that not all these new business models will survive or thrive. Nevertheless, it’s exciting to think about the possibilities.