The USA’s second millimeter wave spectrum auction for 5G networks looks set to raise more money than the first one. The 24 GHz sales hit $526m in bids on Tuesday March 19, having started on the previous Thursday. Its predecessor, in 28 GHz, raised a total of $702m when it concluded in mid-February.
The second auction was expected to be more fiercely contested, because far more of the licences on offer cover major metro areas, which were largely absent from the 28 GHz sale. Since these high frequency bands are mainly of value for densification, because of their short range, urban licences are essential, unless a company wants to major on the other significant use case for mmWave 5G, in fixed wireless access (FWA). However, although Verizon and AT&T have both initiated their 5G roll-outs with FWA services, using their existing 28 GHz and 39 GHz assets, this is just a preamble for the core business case of dense urban and industrial mobility.
Unsurprisingly, then, the bidding in the first 10 rounds of the 24 GHz auction was heavily concentrated on major cities such as New York, Los Angeles and Chicago. The process started with a ‘clock phase’, in which participants bid on generic blocks in territories called Partial Economic Areas (PEAs), in successive bidding rounds. That will be followed by an ‘assignment phase’, in which winners of those generic blocks bid for specific frequency assignments, and the precise prices are reached.
The FCC will not announce individual participants’ wins or bidding activity until the auction is concluded, but has listed the bidders, which number more than 35, including all four national MNOs, plus broadband wireless start-up Starry, and satellite TV provider Dish Network. However, it seems that the cablecos are less active than expected, which could dampen down price competition and make pre-auction estimates over-bullish. For instance, spectrum analysts AllNet Insights & Analytics have forecast that the 24 GHz auction could raise between $2.4bn and $5.6bn in bids.
The 24 GHz band is not perfect though. Its major downside is that it is unlikely to be a globally harmonized band any time soon. This year’s World Radio Conference is expected to focus on 26 GHz and 39 GHz, leaving the USA out of the global mainstream with its focus on 24 GHz and 28 GHz (though AT&T’s 39 GHz will be global). There is wide expectation that 28 GHz will become widely supported by global device and equipment makers, because it is being considered by several regulators based on its heavy usage in the USA and because it is very close to 26 GHz, but 24 GHz raises more technical challenges and appears to have less prospect of significant scale outside North America.
The latest auction went ahead despite a request from some politicians that it should be delayed. Two senior members of the House of Representatives’ Science, Space and Technology Committee wrote to the FCC before the process began, accusing the regulator of dismissing concerns about interference with weather forecasting systems. The National Oceanic and Atmospheric Administration (NOAA) and NASA have both warned of the risk of interference with sensors in adjacent bands to 24 GHz, which are used for weather and climate purposes.
In Europe, auctions are picking up pace with 5G in mind, though they are focused on the mid-band spectrum around 3.5 GHz rather than mmWave. Most European regulators are still in consultation phase about the high frequencies and will wait until after WRC-19 to make final decisions.
The most important of these auctions so far has kicked off in Germany, despite legal objections from all three MNOs. The process is an important one because of the size of the economy, but also because the regulator, BNetzA, is setting an interesting precedent by earmarking some spectrum for industrial use.
Some enterprises and their service providers round the world have called to be given their own allocations, so that they can build networks optimized for their particular requirements, particularly for indoor and IoT purposes. Most auction structures make it hard for a non-MNO to justify the cost of spectrum, and so enterprise specialists tend to get left behind in the bidding (though neutral host provide DenseAir has succeeded in some smaller countries such as Ireland and Portugal).
Only the German regulator has gone as far as to set spectrum aside for a particular enterprise usage, reflecting the strength of the country’s manufacturing sector and its investment in modern, digitalized Industrie 4.0 processes, which are expected to be enhanced by 5G – provided the right kind of optimized, indoor-centric, low latency networks are built, which may be a hard case to make for a conventional MNO.
A group of auto makers – BMW, Daimler/Mercedes and Volkswagen –called for airwaves to be set aside for them, and some manufacturers joined the call for dedicated spectrum in which they, or their specialist service providers, can build 5G networks in the locations they need them, and with the particular performance characteristics they require for applications like mobile robotics and predictive maintenance. A spokesperson for Siemens told Reuters: “We can’t wait for the network operators to be ready – we are in the midst of Industrie 4.0.” It wants to use 5G in its plants in Berlin and Erlangen to support direct communications between machines, and to make better use of the firm’s Mindsphere AI-assisted process platform.
The auto group’s main motivation was to ensure that sensitive data is fully secured and controlled within their plants. This need for better control will be a key driver of private cellular networks – in many cases, a more important one than ultra-low latency, which only applies to a few use cases in the short to medium term. Enterprises are extremely nervous about ceding control over their data, or their critical processes, and want the same level of management that they have over their internal LANs and WLANs.
BNetzA responded with plans to offer localized licences within the C-band and 26 GHz frequencies to industries engaged in ‘Industrie 4.0’ programs, initially as part of the 3.6 GHz auction scheduled for March. These local licences will be provided on “better-than-operator” terms, said the agency, as the deadline to apply expired this week. The allocation process will run in parallel with a more conventional auction of national licences in 3.6 GHz and 2 GHz.
The MNOs have opposed BNetzA’s policy vociferously, as well as the minimum service obligations put in place for the 3.5 GHz licences. A court in Cologne dismissed motions brought by Deutsche Telekom, Telefónica Deutschland and Vodafone last week, seeking to have those obligations set aside. The regulator wants successful bidders to commit to covering 98% of German households with access to mobile broadband speeds of 100Mbps by the end of 2022.
The MNOs are also hostile to proposals that might force them to grant access to their networks if a fourth MNO enters the market. As a condition of the merger of Telefónica O2 and E-Plus in 2016, the merged entity had to offer capacity for a new MVNO. Drillisch was that newcomer, and made strong headway in its first year of operation, before being acquired by wholesale and retail fiber Internet provider United Internet (UI). UI took a majority stake and merged Drillisch with its own 1&1 retail broadband subsidiary to create a converged operator with 12m customers and annual revenues of more than €3.2bn ($3.5bn). It may now look to leverage its fiber network and move beyond MVNO status by acquiring 5G spectrum.
Over the border in Austria, the auction of licences in 3.4-3.8 GHz spectrum concluded earlier this month, raising €188m for 390 MHz in total. Telekom Austria’s A1 mobile unit bought up to 140 MHz of frequencies in all regions for €64.35m, while T-Mobile and 3 Austria also secured nationwide licences with 110 MHz and 100 MHz respectively in all regions, at a cost of €56.9m and €51.9m. A handful of smaller players also won regional licences, including cableco LIWEST and utility company Salzburg AG. Setting aside regional licences, with a bidding structure that makes them accessible to non-MNOs, may become a common way for regulators to encourage enterprise players without depriving MNOs of access to decent mobile broadband capacity on a national basis.
The sale was another example of the extreme variations in pricing which are emerging in Europe’s mid-band auctions. The highest total was in Italy, which raised €6.55bn, with €4.35bn of that coming from the sale of 200 MHz in the 3.7 GHz band. Of course, Italy almost seven times larger than Austria in population, so a fairer comparison is with Austria’s western neighbor, Switzerland, which raised about €79m from the 3.5-3.8 GHz band, in a multiband auction that raised a total of CHF380m.
The Austrian regulator had set a reserve price of just €30m for its auction, with the aim, according to telecoms regulator Johannes Gungl, of “creating the best possible conditions for the 5G roll-out, thereby establishing an ideal basis for the Austrian economy.” The regulator wanted to avoid the criticisms of its 4G auction, which raised over €2bn in late 2013.
Austria is now working on a second 5G spectrum sale, including 700 MHz, 1500 MHz and 2.1 GHz licences, to be offered in the first quarter of 2020.