In the high stakes chess game of wireless spectrum, the moves in 2012 have come at an every greater rate. Last week, the FCC unanimously approved freeing up 30 MHz of satellite spectrum, owned by Dish Network, and the 10-megahertz H Block for land-based mobile broadband, including 4G LTE, by removing regulatory barriers that limited this spectrum to satellite use.
“More spectrum available generally equates to good news for towers,” wrote Christopher Larsen, analyst, Piper Jaffray & Co. “With Dish Network’s approval, it is expected to build out a wireless network using its spectrum. If it partners with someone, we expect it could be worth $350 million in incremental industry rent, while if it builds on its own, it could be as much as $600 million in rent, all with very little incremental cost for the towers.”
While the move might have similarities to last year’s ill-fated attempt to reallocate LightSquared’s L- Band satellite spectrum to terrestrial wireless use, the FCC took more time on this one launching proposing the change in March 2012.
“Carefully balanced technical requirements will unlock tremendous value in both the AWS-4 band and the 10 MHz H Block,” Tammy Sun, FCC director of communications said in a prepared release.
The FCC will take public comments and then auction the H Block in 2013 to help fund the FirstNet nationwide public safety network and to reduce the deficit. “[The H Block is spectrum that Sprint has long wanted, as it fits very well with its existing G-Block spectrum,” said Christopher Larsen, analyst, Piper Jaffray & Co.
The 40 MHz of spectrum (2000 MHz – 2020 MHz and 2180 MHz – 2200 MHz) is known as “AWS-4” or “AWS-4 spectrum” because of its proximity to other spectrum bands previously identified as Advanced Wireless Services (AWS) spectrum bands.
The reallocation of the spectrum signals the end of the Mobile Satellite Service in the 2 GHz band. Three 2 GHz MSS satellite operators — Boeing, Iridium, and Celsat — surrendered their licenses in 2005, which left two satellite operators, DBSD (then known as ICO) and TerreStar (then known as TMI). DBSD and TerreStar launched satellites in 2008 and 2009, respectively, but eventually went bankrupt without providing service. Dish Network purchased the two companies and their spectrum out of bankruptcy.
“In the 1990’s it seemed like a good idea to allocate wide swaths of spectrum to satellite-based services, but with the more recent explosion in the amount of data traffic, that spectrum is more properly allocated to terrestrial users,” Michael Higgs, of counsel at Schulman Rogers, told AGL Bulletin. “The ability to reuse spectrum near ground level over smaller geographic areas provides efficiencies that simply cannot be matched by the birds-in-the-sky. A great analogy is the transition from high-site, high-power sites in the 1960s and 1970s to the low-power, low-site cellular-ized systems of the 1980s and 1990s.”
The Wall Street Journal trumpeted that Dish Network now owns spectrum valued by analysts at $12 billion, which it had purchased for $3 Billion.
“The demand for cellphone spectrum is huge relative to satellite,” Trefis wrote. “Ergen bought these assets from distressed companies TerreStar and DBSD. Ergen may now consider selling this spectrum for a huge gain or partnering with a wireless carrier to offer some form of wireless services.”
Dish Network spectrum in the AWS-4 band is unencumbered by any threat from the military, the GPS community or the net neutrality proponents, according to Ted Abrams, wireless industry consultant.
“The only recent protest was launched by Sprint, but without a convincing argument,” Abrams said. “Indications are positive that Dish Network will actually be able to launch a terrestrial network with satellite supplement to fill in the coverage gaps. The likely framework will be through a relationship with one of the four national carriers rather than as a new grass-roots build.”
Abrams also mentioned possibility that Verizon or AT&T or both may work to limit or kill the business model for Dish Network.
“Everybody needs more spectrum, but the two biggest national operators aren’t as desperately needy for spectrum as are the smaller nationals, and none of the top four are starving like the regionals and independents,” Abrams said. “Those at the top of the hill are more likely to kick Dish Network down the mountain than to offer a hand up, or to be silently neutral.”