Right before Easter weekend, the FCC closed its broadcast incentive auction, repurposing mostly unused TV airwave spectrum for nationwide wireless mobile use. In the first phase, the FCC conducted a reverse auction, allowing 175 TV broadcasters who own TV spectrum to sell that spectrum. In the second phase, the FCC auctioned that spectrum to nationwide cellular carriers, and received $19.8 billion in revenue for the 70MHz of spectrum. Of those, some $10 billion will be paid to the TV broadcasters who sold their spectrum. Broadcasters have a 39-month transition period to move their stations to new channel assignments. Not only was this the first incentive auction the FCC ever conducted, it also brought one of the largest sums for spectrum, and was the largest one-time allocation of spectrum under 1GHz.

Why is this important?

Do you remember when 3G (third generation wireless) was announced? Cellular carriers started deploying the higher bandwidth network infrastructure as quickly as they could, touting streaming video and other services that needed the higher bandwidth as reasons to switch to them.

Soon thereafter, the iPhone came out with streaming video apps, and very quickly, the carriers started throttling bandwidth back. AT&T complained that 60% of its data traffic came from iPhone users, and that wasn't acceptable. Of course, they forgot that not too long ago it was the promise of those specific services that iPhone users were consuming that were used to incentivize customers to switch to AT&T.

While unlimited data seemed reasonable to offer initially, the proliferation of bandwidth-consuming applications (with video leading them) started causing network bottlenecks, services disruptions, and customer complaints. Pretty soon, new unlimited data plans were not available anymore.

However, with continuous demand for high-bandwidth applications, it became clear that unlimited data plans will have to make a comeback, which now they have.

Two things enable that bandwidth: the amount of spectrum, and the spectral efficiency of its use. The move from 3G to 4G, LTE, and now 5G achieves the latter. As technology advances, cellular operators can "squeeze" more data out of the same spectrum. This auction increased the former.

It should also be noted that this spectrum is in the 600MHz band, that is known to have better penetration, range, and overall performance, and while the large cellular carriers already have access to such spectrum, T-Mobile fell behind.

Why was T-Mobile the biggest winner?

The top three cellular auction winners were T-Mobile, Dish Networks, and Comcast. T-Mobile spent $8 billion to get almost half of the spectrum that was made available in this auction, and Dish network spent $6.2 billion to get a quarter. It might seem surprising that AT&T, Verizon, and even Sprint did not participate significantly in this auction, but that was actually by design. FCC design. The FCC realized that smaller cellular carriers, lacking the means of giants AT&T and Verizon, would not be able to win spectrum, and therefore carved some spectrum especially for the smaller and rural players. The surprises were only that Sprint and Verizon did not bid at all.

Published on: Apr 17, 2017
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