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21 January 2021

C-band auction wraps up at $80.9bn, lobbyists laugh on way to bank

If you’ve ever looked at your cellphone bill and grimaced, in the US at least, cast your eyes towards the FCC’s auction process and you might have some sympathy. The latest round of the C-band spectrum auctions have concluded, and the total commitment as of writing stands at $80.92 billion.

When you slice it by the number of MHz available by the US population, the C-band auction was around 4.3x costlier than last year’s CBRS auctions – covering 3.55-3.7 GHz. While this sounds exorbitant, financial analysts were expecting something more like 7x multiples, meaning that this C-band round might have been something of a bargain.

That is, of course, a relative term, but the spectrum available here is being touted as foundational to the US MNO’s 5G plans. This auction dwarfs the previous FCC record holder, which was the AWS-3 sale in 2004, which sliced up the spectrum that would power the 3G deployments. That auction hit some $45 billion, and the prices paid for the C-band show how these MNOs are clamoring for mid-band spectrum.

The C-band, spanning roughly 4 GHz to 8 GHz, has been long-used in the communications realm. Back in the day, it was used for terrestrial microwave relay chains, but the satellite market was the most prevalent adopter – using 3.7 GHz to 4.2 GHz for downlink (overlapping with the S-band), and 5.9 GHz to 6.5 GHz for the uplink.

This C-band Auction 107, consisting of 280 MHz of spectrum in the 3.7-3.98 GHz range, divided into 5,684 location-based blocks, includes reallocation costs, which will be paid to the satellite operators that are being compelled to vacate a portion of the C-band by the FCC. These are currently estimated to be in the $3.3 billion range, in addition to the $9.7 billion that has been assigned to the accelerated clearing costs. This is the culmination of a lot of politicking, lobbying, and general industry turmoil.

Broadly, the MNOs have been lusting after extra spectrum, because their existing holdings are not enough to provide the blazing speeds that 5G promises. Essentially, everything below 3 GHz is committed to supporting 2G, 3G, and 4G, and the fractured environment of broken-up chunks of spectrum is not conducive to the bleeding-edge capabilities provided by the 5G standards.

Essentially, the MNOs need much bigger uninterrupted chunks of spectrum, in order to deploy 5G networks properly. As such, they have been putting pressure on the FCC to free up more of the radio frequency spectrum, so that they can buy their exclusive usage licenses, and create proper 5G deployments.

The CBRS auction was one example of this, where lobbying pressure pushed the FCC towards auctioning off the midband properties. The DSRC decision is another instance, a sliver of the 5.9 GHz band that had been dedicated for use in self-driving vehicle technologies. With the C-band, the FCC was promising to give the MNOs what they wanted, and facilitate the migration of satellite operations from the overlapping bands.

Back in August, we explored the latest wrinkle in the C-band auction drama, specifically whether the FCC would choose a lump-sum or a graduated payment plan for the satellite reallocation. Verizon also took umbrage that Intelsat was floating the idea of extending one of its deadlines from December 2021 to 2023, arguing that such a delay would scupper national 5G roadmaps. Verizon was prioritizing this mid-band auction, as rival T-Mobile has much better existing holdings.

Along with Intelsat, Eutelsat, Telesat, and Claro, are all in line to get a share of the reallocation costs. Essentially, they have submitted plans to the FCC that outline how much it is going to cost them to migrate their services out of the C-band, and in turn, the FCC is going to reimburse them accordingly.

This led to a proposal that would truncate the existing 500 MHz in the 3.7-4.2 GHz range used for satellite operations down to 200 MHz, which would free up the 300 MHz that has just been auctioned off. The August drama was over whether the FCC was just going to pay out a one-off lump-sum, or whether it was going to ask for detailed costs documentations, and then pay out gradually. Essentially, the satellite providers were dragging their feet, working out which approach would net them the most cash.

It is unclear, without some hefty digging, which way each of the satellite operators has gone. Similarly, it is not yet known how much exactly each of them is being paid, nor on what schedule. The identities of the winners have yet to be revealed, but will emerge in short order.

Verizon was hoping to net 100 MHz of the 300 MHz available, although it will have had a sweaty brow upon hearing of T-Mobile’s plan to spend $3 billion on spectrum. AT&T was strangely quiet in the run up to the auction, but we suspect it will have been bidding too.

The three leading MNOs will have to pass these spectrum costs onto their customers. Video is still the largest single factor for network traffic, and the growing popularity of livestreaming has been cited as a major driver for 5G strategies. You need enough bandwidth to deliver video from the central network to your subscribers, but you also need the uplink capacity to transport their live video feeds from the edge to the rest of the internet.

However, there was a smattering of fixed-line interest in Auction 107 too. Altice USA, Charter, Comcast, Dish Network, and Viasat all registered to bid. Comcast and Charter have plans to build their own cellular networks, of course.