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Proceeds From 5G Airwaves Auction Disappoint; Blame Verizon

Jan. 10, 2019, 9:36 AM

The Federal Communications Commission’s first-ever auction of high-band airwaves for speedy 5G wireless services is bringing in less than a record haul for government coffers, despite intense interest from the nation’s top four telecom carriers in building next-generation networks.

Proceeds from the nearly completed auction of 28 gigahertz (GHz) spectrum have plateaued at about $690 million since December — well below the amount generated by some previous FCC auctions, spectrum analysts told Bloomberg Law. Bidding is continuing even though the FCC has halted most of its operations during the partial government shutdown. FCC spokesman Mark Wigfield declined to comment on the auction.

Verizon Communications Inc. already dominates the 28 GHz band, particularly in cities, through its $3.1 billion acquisition of Straight Path Communications Inc., analysts said. That left the remaining 28 GHz band airwaves to mostly rural areas, which have fewer potential subscribers and less broadband infrastructure.

“It’s a question of whether a carrier needs additional complementary spectrum in the places where this auction is covering,” Tim Farrar, president of telecom consulting firm TMF Associates, told Bloomberg Law.

AT&T Inc., like Verizon, has a lot of high-band spectrum. T-Mobile US Inc. may not be interested in more high-band airwaves if its merger with the fourth national U.S. wireless carrier, Sprint Corp., goes through. That adds up to relatively low expectations, not only for the 28 GHz auction, but other high-band auctions to come in 2019.

Verizon Dominates

Verizon took control of the most valuable 28 GHz spectrum when it acquired Straight Path, Brian Goemmer, president of Allnet Insights & Analytics, a spectrum analysis firm, said. Those airwaves cover some 70 percent of the U.S. population, including most major metropolitan areas. Verizon paid a $614 million FCC penalty to settle commission allegations that Straight Path had failed to use its spectrum.

It’s unclear who has bid on the airwaves because auction bids are anonymous. T-Mobile US Inc. already controls a smaller swath of 28 GHz spectrum.

The next high-band auction, for 24 GHz spectrum, will start after the 28 GHz auction ends and is expected to be somewhat more lucrative. Triple the amount of airwaves will be up for grabs, Farrar said. He estimated that auction could bring in about $2 billion. Carriers, including T-Mobile and AT&T, will likely compete for 24 GHz airwaves in New York City, Los Angeles, and Chicago, among other urban areas where high-band spectrum is seen as most valuable.

By contrast, the FCC’s 2015 auction of airwaves for mobile broadband raised a record $45 billion in revenues, while the broadcast incentive auction — which closed in 2017 and transitioned broadcast airwaves to wireless use — yielded $19.8 billion. In those auctions telecom providers were vying for low-band airwaves that were highly valued because they can carry signals over long distances and penetrate buildings and other obstacles, unlike high-band spectrum.

Why High-Band?

5G networks will run on a mix of high-, mid-, and low-band airwaves, but carriers see high-band as essential to ensuring their 5G networks can cover urban areas. High-frequency airwaves can carry much more data at faster speeds than the low-band spectrum powering existing 4G and 3G networks, but don’t travel as far.

The agency also plans to auction more high-frequency airwaves in the 37 GHz, 39 GHz and 47 GHz bands in the second half of 2019. AT&T Inc. controls a large chunk of 39 GHz airwaves through its acquisition of FiberTower.

Of the four national carriers, T-Mobile may be most desperate to increase its high-band spectrum holdings. But if its proposed merger with Sprint is approved, T-Mobile may not need more high-band spectrum because it could tap Sprint’s mid-band spectrum portfolio to power its 5G network.

“T-Mobile might be more interested in acquiring a nationwide footprint which the 24 gigahertz auction could provide,” Farrar said. “On the other hand, there’s a lot up in the air for them with their potential merger of Sprint and if that comes off, then they will have a lot of mid-band spectrum to build out and supply a lot of the 5G capacity they need for the next few years.”

To contact the reporter on this story: Jon Reid at