UPDATE — November 25, 2014 — Auction bids now total more than $34 billion. Fearing that the operators are spending to much on the spectrum, investors are selling their stocks, according to Aaron Pressman, Yahoo Finance. AT&T’s and Verizon’s stock went down 3 percent and 4 percent, respectively, while DISH Network shares vaulted 15 percent.
November 20, 2014 — The U.S. government would appear to be the big winner as the AWS-3 auction more than doubled its reserve price on Wednesday with more than $24 billion bid so far. The real winner, according to analyst Tim Farrar, may be Charlie Ergen, whose DISH Network Corporation owns AWS-4 spectrum, which is now worth a whole lot more than before the auction.
AT&T, Verizon, T-Mobile and Ergen, through three separate consortia, are all participating in the auction, which offers 1,614 Advanced Wireless Services licenses in the 1695-1710 MHz, 1755-1780 MHz and 2155-2180 MHz bands.
Farrar theorized in a blog post yesterday that Ergen may be responsible for the bidding frenzy. In short, he suspects that Ergen may have each of his consortia bidding against each other. And because the bidding system is blind, each carrier will think one of the other carriers is bidding. If the consortia are bidding up the licenses, Farrar predicts they will all stop bidding at about the same price because of pre-set budgets.
It may sound far-fetched, but you only have to look at the FCC tortured history of doling out spectrum licenses to realize auctions may have an Achilles heel, too. It all began with comparative hearings, which just turned into court battles. Next, the commission instituted a lottery system, which led to application mills and an active secondary market of people flipping licenses. Maybe in today’s auctions, one person or company should not be allow to participate in multiple competing bidders.
The real question is whether towers are a big winner. Maybe yes and maybe no. More spectrum in the hands of the carriers means more activity for tower services, construction and ownership companies. But infrastructure build outs depend on a number of factors, not the least of which include budgets and regulatory issues (See AT&T story). So, if the spectrum is being overbid, the extra billions being spent on spectrum could mean slower build outs or more pressure on our industry to do a lot of tower work for less money.