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Next 5G Auction

3.45 GHz Bidders Likely Have Needed Data, but Residual Concerns Could Lower Prices

Bidders may not have all the data they want, but likely what they need, to assess bids in the upcoming 3.45 GHz auction, experts told us. The FCC and NTIA have been working behind the scenes to provide more data on DOD radars that must be protected after the auction, which starts Oct. 5. CTIA has continuing concerns. Analysts said uncertainty could mean lower bids.

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This week, the FCC released a protective order giving bidders access to controlled unclassified information on DOD systems and operations in 3.45-3.55 GHz (see 2108230037). The major wireless carriers, smaller carriers and Dish Network, but not cable operators, were among those that applied to bid (see 2108180047). Commissioner Brendan Carr said after the August commission meeting he remains concerned about the amount of information made available (see 2108050038). The FCC and NTIA didn’t comment.

"Potential bidders likely have enough information and the wherewithal to move forward knowing it’s one of the last identified bands for licenses in the near future,” said former Commissioner Mike O’Rielly, a longtime advocate of auctioning the band: “It’s unlikely the auction will fail because that helps no one, especially the licensed community,” he said.

CTIA, which pushed the FCC to make more information available (see 2107220064), continues to argue for transparency. “The success of the 3.45 GHz auction rests in significant part on timely information being made available about the extent to which potential bidders will have access to the band,” a spokesperson emailed: “CTIA has continued to press for this necessary transparency and urges its federal partners to make as much granular information available as possible so industry participants can feel confident in their bidding decisions.”

Some large markets, including Washington, Philadelphia and San Diego, are subject to coordination with DOD, which put pressure on the government to provide more data, said Sasha Javid, BitPath chief operating officer and a former FCC auction official. “It is hard to value bids without understanding the product you are bidding on,” he said. “Whether this latest move by the government will entice Verizon and T-Mobile to bid aggressively in this auction is questionable given their enviable mid-band spectrum holdings,” he said: “Certainly a refocused AT&T and Dish will be eager to access this new information, as I expect both to bid aggressively in this auction.”

Remaining questions will likely show up in the amounts bid, predicted Summit Ridge Group’s Armand Musey. Companies “will just discount their bids to account for uncertainty,” he said. “Larger bidders are more prepared for uncertainty as they can take a portfolio approach,” he said: “Some licenses might have more limits based on encumbrances than they expected, while others will have fewer. It’s tougher for the smaller bidders.”

Carriers will always want more transparency from government incumbent users about planned future use in a band of spectrum that they’ll be sharing than they are likely to receive,” emailed New Street’s Philip Burnett. DOD has started providing data, but “after receiving that information, T-Mobile filed a comment last month saying it wasn’t enough (or at least that they’ll need more info after the auction quiet period starts),” he noted (see 2107150042). Companies will still participate, Burnett said: “They might be unwilling to pay as much for a market that includes sharing… than they would for an exclusive license, but they will still bid.”

The need to share in some locations likely won’t be “the big driver of value at the auction,” Burnett said. Nationally, just 5 MHz of 100MHz needs to be shared with government users, he said: “It’s 11% of POPs but not all blocks in each market are shared.” If the shared parts are valued the same as citizens broadband radio service licenses (22 cents per MHz/POP and the remaining at C-band levels ($1.10) that implies an average $1.06 MHz/POP and $33 billion auction, he said: “We don’t think the 3.45 GHz auction will actually reach the C-band price, but this illustrates the impact on value from sharing in the band.”

MoffettNathanson’s Craig Moffett is skeptical of the level of interest in the auction. “The C-band auction left a lot of balance sheet damage in its wake,” he said: “I’m not sure the carriers have either the stomach or the dry powder to take on even more spectrum. Dish needs more mid-band … but without the cable operators, and with the majors’ needs largely satisfied, it’s not clear who is going to set the market in this one.”