Like bookends, 3 GHz auctions will take place at the beginning and the ending of 2021, which could forever change the balance of 5G power among U.S. carriers. As the FCC began its latest 5G spectrum auction this week, making 280 megahertz of spectrum available in the 3.7-3.98 GHz band, an industry note by New Street Research showed how the two auctions could affect each other in terms of proceeds.
“The 3 GHz auctions could have the biggest impact on the industry of any auction since the PCS auctions of the 1990s, which gave birth to T-Mobile and Sprint,” wrote Jonathan Chaplin, research analyst, New Street Research.
Because of the capacity/coverage characteristics of mid-band spectrum, these auctions could completely reshape the competitive landscape of wireless carriers, according to Chaplin.
“The 3 GHz band will be the workhorse for 5G networks; these bands will carry the bulk of mobile data within the next few years,” he wrote. “The 3 GHz band sits at the sweet spot in the frequency range, being high enough to accommodate massive MIMO and beamforming, while low enough to propagate decently and penetrate buildings and other obstacles.
“It can also accommodate wide channels of 100 megahertz or more, which drives speed and efficiency. Most 5G deployments globally are focused on the 3GHz band; this is where the ecosystem will develop most robustly,” he added.
New Street Research projects that all carriers will play in the auctions, but Verizon will purchase the most spectrum (130 megahertz), followed by AT&T (80 megahertz), T-Mobile (60 megahertz), Dish Networks (40 megahertz), and cable and others (40 megahertz).
T-Mobile has close to three times the spectrum of Verizon and twice the amount of spectrum that AT&T owns. Additionally, T-Mobile currently has the only mid-band spectrum capable of supporting massive MIMO, according to New Street Research.
“The difference in quantity matters a great deal,” Chaplin wrote. “T-Mobile will be able to offer more capacity and faster speeds with a lower unit cost as a result.”
Depending on who wins the 3 GHz spectrum, AT&T or Verizon could level the playing field or T-Mobile could preserve or extend its lead, he added
With so much on the line, the bidders in the auctions are bound to part with some serious cash. The two auctions are not operating in a vacuum. New Street Research created two scenarios that predict how the auctions could affect each other if the rules for the second auction become public before the end of the first auction. In the first, the FCC settles the license regime for 3.45-3.55GHz before the end of the C Band auction with similar rules (exclusive licenses; high power). Then bidders would pony up $46 billion for the C Band and $17 billion for the 3.45-3.55 GHz band, New Street Research estimated.
In the other scenario, the second auction’s rules are unknown causing bidders to spend more for the C-Band ($52 billion). “If rules for 3.45-3.55 GHz match the C-Band (exclusive licenses; high power), it could raise $11 billion ($0.34 / MHz-POP) based on balance sheet capacity that builds in 2021; if rules match CBRS (shared with unlicensed; low power) it may only fetch $7 billion (22 cents / MHz-POP),” Chaplin wrote.
Source: New Street Research