Verizon is the latest carrier to get a network capacity boost from temporary access to additional spectrum during the ongoing coronavirus pandemic, and one analyst firm sees potential for spectrum loans to turn into lease arrangements.
The Federal Communications Commission (FCC) on Wednesday granted Verizon’s request for special temporary authority (STA) to tap AWS-3 spectrum from Dish Network-related entities, Northstar Wireless and SNR Wireless LicenseCo, for 60 days at no cost to handle increased network demand as many in the U.S. hunker down in efforts to slow the continuing spread of COVID-19 across the country.
“Wireless services are a vital part of connectivity, and this has never been truer than during this crisis, when so many people are turning to telework, remote learning, and telehealth options,” said FCC Chairman Ajit Pai in a statement (PDF). “I want to thank Northstar and SNR for their willingness to allow this use of the spectrum for which they hold licenses. I’m also grateful to Verizon for seeking out ways to meet increased consumer demand.”
Northstar and SNR are loaning Verizon AWS-3 spectrum that adds 8 MHz nationally on average, according to a Thursday note by Jonathan Chaplin at New Street Research. Both Verizon and T-Mobile – which also just got a spectrum infusion from Dish and others for more 600 MHz – should be able to deploy the spectrum “almost instantly” since those bands are already deployed in their networks, bringing immediate benefits to “a substantial portion of their subs,” according to New Street.
In a Wednesday afternoon update, Verizon said its fiber optic and wireless networks were continuing to perform well in the face of shifting demands and noted that engineers quickly added capacity “in small pockets where there has been a significant increase in usage.”
Analysts at LightShed Partners raised concerns this year about the amount of remaining spectrum Verizon has for increased LTE demand and 5G service, as well as lack of near-term solutions.
It remains to be seen if Verizon will seek to continue using the AWS-3 spectrum after the next 60 days, but New Street raised the possibility of converting to a lease, saying “it would make sense for everyone involved.”
The firm noted Dish still has more that it could loan and pointed to carriers’ continued need for more resources past 60 days.
Putting a random value of $1 per MHz-POP and assumed lease payments on a 6% cost of capital, New Street calculated the spectrum Verizon’s borrowing could bring in $160 million per year to Dish – a figure Verizon could afford and Dish Network could use at it looks to build its own wireless network.
“If they found a taker for the 10 MHz of nationwide PCS, at the prices mentioned above that could bring in another $190MM annually,” wrote New Street.
Other spectrum like AWS-4 would be harder to loan or lease since carriers don’t have it already deployed and couldn’t use it as quickly, the firm noted.
Still, New Street said altogether Dish has 36 MHz it could loan and then lease, for close to $700 million annually at the values it assigned (though they made it clear this value is more of a guess and negotiations could result in half the amount).
“And if all of this is nonsense, and there is nothing more on offer than a sixty day loan, perhaps the FCC will be equally generous as they consider what to do with the $3BN of DE licenses relinquished by Dish affiliates.”
The relationship between spectrum lenders Northstar and SNR, and Dish is not exactly straightforward. Northstar and SNR won roughly $13.3 billion worth of AWS-3 spectrum during the FCC’s 2015 auction, but found themselves in a battle with the agency to retain bidding credits worth about $3.3 billion. The bidding credits are for use by “designated entities” (DEs) for small businesses to bid, but the FCC sought to revoke the discount on the grounds that Dish Network retained a controlling interest in the entities.
Dish in 2018 made changes to its agreements with Northstar and SNR in hopes of regaining the small business discount, but it's not clear where that stands now.
In response to questions about extending Verizon’s use of AWS-3 spectrum after 60 days, Allen Todd, general counsel for Northstar’s parent company Doyon, told FierceWireless in emailed comments that the company was heartened by the FCC’s quick action on the STA request, but could not respond to questions about Verizon’s internal operations.
A Verizon spokesperson was not immediately available for comment.
The FCC has been quick to grant access to additional spectrum during the public health crisis, this week granting similar STAs to T-Mobile, AT&T and U.S. Cellular. Wells Fargo analysts indicated that instead of delaying spectrum auctions planned for this year, the current situation could highlight the urgency of getting more spectrum to carriers.
“Once this crisis passes we believe the heavy demand on wireless and wired networks will shine the light on the need for additional spectrum allocation and continued programs to support pushout of broadband into rural areas to lessen the digital divide,” wrote senior analyst Jennifer Fritzsche.