700 MHz: Business as Usual?Monday, December 17, 2007
In almost every industry publication you pick up, every wireless blog written lately and even in the business publications, you are likely to see articles on the implications of the 700-MHz auctions. The December 3, 2007 deadline for filing intent to bid has passed and little by little, the names of the potential bidders are finding their way into the press (the complete list is due from the FCC shortly) and speculation is rampant that this auction will result in significant changes for the wireless industry.
In reality, we are already seeing the beginnings of some of these changes. There is more discussion about open access networks where any approved device will be able to download anything from the Web, new pricing models are evolving, next-generation technologies are being chosen by incumbent operators and new players are looking to make a dent in the wireless industry come auction time.
So far, we know Clearwire, Sprint Nextel, T-Mobile, Time-Warner, Microsoft, Apple and DirecTV are not planning to bid for the spectrum. We also know the bidders will include AT&T, Verizon Wireless, Google, Frontline, Metro PCS, Leap Wireless (Denali), Cox Cable, Qualcomm EchoStar and CableVison. However, with the exception of Google's stated interest in the C band, and the assumption that Frontline is only interested in the D block (shared first responder) spectrum, we don't know which blocks these companies may be going after, nor do we know the entire list of the bidders.
Even so, we can make some educated guesses. For example, Qualcomm is probably interested in the E block, which is 6 MHz of unpaired spectrum next to its existing 6 MHz of MediaFLO spectrum. But could Qualcomm also be interested in the shared public safety spectrum? We can guess that Cox Cable probably won't bid on a nationwide footprint of spectrum, but perhaps it will pick and choose from the multiple licenses in the A and B blocks within its present cable coverage areas. It is also a pretty safe bet that both AT&T and Verizon Wireless will be going after portions of the A and B blocks to fill in cities where they are light on 850-MHz, 1900-MHz and AWS spectrum, and that both companies will be going head-to-head with Google for the C block. We could also speculate that both companies will be bidding on the D block of shared first responder spectrum, but that is not a bet I would make in Las Vegas at the moment.
Leap and Metro PCS do not appear to have the financial resources to try for a nationwide footprint and their model of serving specific metro areas has been working fairly well, so we might surmise that these two will be going after A and B block licenses for cities they don't presently serve and perhaps one or two of the twelve licenses in the C block. EchoStar and CableVison could be going for the C block, but the more bidders there are for the C block, the more it will cost the winner and I am not sure either of these companies has the stomach for spending $6 billion for 22 MHz of spectrum for a nationwide service.
As other bidders become known, I, along with a lot of other people, will be trying to figure out what blocks will be bid on by whom. Once the official list is out―and I assume there will be some surprises on that list―filling in a spreadsheet by company and blocks available will be a fun project. Once this spreadsheet is finished, the only other thing that could be guessed at is who has the most staying power and who needs the spectrum the most. In the recent AWS spectrum auction, T-Mobile was the neediest bidder by far because it did not have enough spectrum to build out a 3G network. It went after AWS spectrum with gusto and came away with what it wanted, which is the ability to construct its own 3G network on an almost-nationwide basis. The cable companies came away with an average of 20 MHz per market, but so far there has been little word on their plans for the use of this spectrum.
The real question in everyone's mind is this: When the dust settles and the bids are tallied, will we end up with business as usual because the bulk of the spectrum has gone to incumbent networks, or will we really be on the verge of a new era in wireless with new players with different types of plans and business models for the spectrum? In the weeks ahead, there will be plenty written about this question and I am sure everyone who writes about it will have a different answer. My view is that it could go either way, but I believe that to begin a new era in wireless it will take a company winning all of the C block (22 MHz) as well as the D block (10 MHz), paired with the 12 MHz from the public safety side. This would give the winner 44 MHz of spectrum to work with MOST of the time.
But we will have to wait and see. One last point here, what if Cyren Call, Morgan O'Brien's company that is now advising the Public Safety Spectrum Trust (PSST), ended up bidding for the D block? That would certainly prove to be an interesting situation to say the least!