April 18, 2017 —
The industry is attempting to unpack the results of the recently ended FCC Broadcast Incentive Auction, which was highlighted by T-Mobile spending $7.9 billion, DISH Network spending $6.2 billion and Comcast spending $1.7 billion. Who won? Who lost? Where are the opportunities?
Big towers will drive most of the initial work as winning bidders hustle to clear the broadcasters from the spectrum, something known as the “TV repack.” The needs of the broadcasters will each be unique. Some will relinquish the spectrum, others will move to different frequencies and others will move to another broadcaster’s tower and share its spectrum, according to Alex Gellman, co-founder and CEO, Vertical Bridge.
“The first step is to move the broadcasters off the frequencies, which will require a lot of work but it is pretty specialized. There will be the need for traditional wireless services providers, tower climbers for line, transmitter and antenna work,” Gellman said.
Wireless companies could start building on the 600 MHz channels on a market-by-market basis or wait till all the spectrum is cleared. That may take up to three years because of the deadline set by the FCC for the broadcasters to vacate the frequencies.
“Normally, the tower industry sees a lot of deployment activity about 18-36 months after the auction,” Gellman said. “This one is going to take a little longer as far as the wireless carriers go.”
Top bidder T-Mobile won 31 megahertz nationwide on average, or 45 percent of the spectrum, which quadrupled its low-band holdings. The carrier has been preparing for the repack of the TV spectrum for some time.
“T-Mobile wants to deploy this spectrum as quickly as possible,” said Gellman. “The market for broadcast tower services was a potential bottleneck that could slow down the TV repack, so the carrier has been actively growing that market.”
Tower Industry Opportunities
Vertical Bridge has identified areas where it has tall radio broadcast towers that can accommodate TV. “We are reaching out to the companies that sold off their spectrum to see how we can help. Broadcasters have options, and we want them to know that,” Gellman said.
The majority of the opportunities for tower companies will have to wait until the spectrum is clear. “Secondarily, down the road, we see an opportunity related to deployment by U.S. Cellular, T-Mobile, AT&T, Comcast and DISH,” Gellman said.
The major winners break down into three groups: carriers, new entrants and investors, each of which will have different reasons they purchased the spectrum.
T-Mobile will most likely use the spectrum for coverage, as it continues to catch up with Verizon and AT&T. It has deployed coverage on spectrum in the 700 MHz band during the last two years.
“Spectrum at 600 MHz is not great for high-density deployments which is why the final bid numbers were not has high as people speculated. They were about half,” Gellman said.
Earlier this month Comcast began reselling Verizon airtime as a Mobile Virtual Network Operator, giving Xfinity Mobile customers access to unlimited data plans as well as to millions of Comcast Wi-Fi hotspots. Gellman said Comcast will use its spectrum to build out a network, which would reduce its dependence on the Verizon network and therefore its operational expenses.
“Having 600 MHz spectrum allows Comcast to provide a high and thin coverage blanket, and if the capacity gets exceeded, it can always fall back to the Verizon network,” he said. “The calculus is based on the economics of providing service. The 600 MHz band is good for propagation; not necessary good for capacity. Initially, it may work very well for them.”
Craig Moffett, MoffettNathanson, was not quite as upbeat. Comcast’s 10 megahertz buy across its footprint fell well short of Moffett’s expectations of a 20-megahertz buy nationwide.
“Comcast’s tepid participation inevitably makes one less confident that Comcast’s long-term intention is to go it alone,” he wrote. “Or to put it more bluntly, the odds that they will someday buy a wireless operator – read T-Mobile or Sprint – just went up.”
Of all the wild cards in this auction, DISH is arguably the wildest. It already had lots of spectrum before the auction, including: 40 megahertz in the AWS-4 (2000/2200 MHz) band, 10 megahertz in the H-band and 6 megahertz at 700 MHz, as well as 25 megahertz of AWS-3 spectrum, according Zach’s.com.
“With the Broadcast Incentive Auction, DISH has billions of dollars invested in spectrum. Its spectrum buy confused many analysts,” Gellman said. “Will they kick the can down the road or will they truly deploy a commercial network for broad use or will they sell it? I don’t think anyone knows yet.
Moffett was decidedly down on DISH’s spectrum buy noting that it seemed to fly in the face of industry expectations that it would either be purchased by a wireless carrier or it would sell its spectrum to a wireless carrier.
“…How can you reconcile the view that DISH Network [plans to sell its spectrum] with the fact that, by definition, they just outbid every possible buyer for precisely the same spectrum they would now hope to sell?” he wrote. If DISH is preparing for a merger, one of the possible acquirers – Verizon – didn’t even bid for spectrum, Moffett added.