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27 November 2019

FCC to auction C-band spectrum next year, in blow to satellite providers

The US telecoms regulator, the FCC, is close to a final plan for the C-Band spectrum, which would give the country’s MNOs access to much-needed midband airwaves. But it seems likely to disappoint the satellite operators which occupy the band, and chairman Ajit Pai has not even made it clear whether they will receive any money from the auction, now planned for late 2020.

The plan is to auction 280 MHz of C-Band spectrum in 3.7-4.2 GHz by the end of next year. Pai tweeted: “After much deliberation and a thorough review of the extensive record, I’ve concluded that the best way to advance these principles is through a public auction of 280 megahertz of the C-band conducted by the @FCC’s excellent staff.”

This will be very important to the operators, especially AT&T and Verizon, which have been forced to use millimeter wave spectrum to deploy capacity-rich 5G, despite its engineering and propagation challenges when compared to the 3.5 GHz band, which is being used for initial 5G capacity launches in most other parts of the world. In the USA, however, this band is occupied by federal agencies (which will be sharing their portion under the three-tiered CBRS scheme) and satellite providers. The latter have been engaged in a long-running and bitter battle with the mobile industry about potential routes to coexistence.

Intelsat, SES and Telesat are the three European satellite companies that have led the C-Band Alliance (CBA), which was set up to lobby the FCC to let them conduct an auction of C-Band spectrum. But the regulator said the CBA’s proposal was inadequate, and that it would be unfair to have private entities conduct a private auction.

In response to the FCC’s announcement, the CBA said the association would continue to work with the FCC on the matter. But it also warned that its members “will be required” to be involved in the proceeding.

“The announcement does not address the critical involvement of the incumbent satellite operators in executing the complex task of reconfiguring and transitioning their networks,” the CBA said in a statement. “Nor does the announcement address the fundamental modification of the rights afforded by the existing FCC licenses held by the CBA members which would be required under a public auction approach. The full cooperation of the satellite operators will be required to ensure the successful clearing of the C-band while protecting the incumbent broadcast services enjoyed by millions of US households.”

The spectrum was valued at $8.8bn in September by financial services firm Jefferies, and that figure is likely to have ballooned since then.

Verizon is set to prosper most from a public auction given its weaker arsenal of midband spectrum compared to its rivals. Meanwhile, pay-TV operators like Altice USA, Dish Network and Charter Communications have said the opportunity to bid in a public auction would allow them to challenge the big four. This suggests a silver lining from a public auction could be increased competition in 5G services and therefore reduced prices.

Of course, C-Band Alliance members no longer have any need for the full 500 MHz of spectrum in the band to deliver video programming, although settling for a public auction will damage the satellite industry beyond reckoning. Allowing the FCC to pursue a public auction will squander the opportunity to pay off mounting debts and also muddies the future directions of CBA members – which represent approximately 95% of the affected revenues of the US C-band market across 120m households.

The upper 200 MHz of the 3.7-4.2 GHz band will remain untouched for programming and while almost everyone agrees that reallocating C-band spectrum for 5G services is the best option, what remains unclear is how the FCC will achieve the most economical auction. More concerning still is the scale of the damage felt by the satellite fleet operators as it now looks certain they will struggle to recoup their C-band investments.