To the uneducated, licensed spectrum is a valuable commodity. For carriers such as AT&T, Dish, T-Mobile, and Verizon to deploy next generation 5G access and services broadly, these service providers need a wide range of spectrum assets. The spectrum gap was abundantly clear as the recent C-Band auction concluded with an astounding $81 billion-plus payday for the Federal Communications Commission (FCC). I want to provide my insights into why the C-Band auction was a record-breaker and the potential challenges it could pose for operators and subscribers alike.
Spectrum 101
Licensed spectrum is best analyzed in three categories – low, mid, and high. Low-band is defined in the sub 1 GHz spectrum range and can transmit over long distances with better penetration but at lower throughput due to smaller bandwidth availability. Mid-band is defined in the spectrum range of 1-5 GHz and can deliver a good balance of transmission distance, high throughput, and low latency. High-band or millimeter wave (mmWave) is defined in the spectrum range of 24-52 GHz and can deliver extremely high throughput and ultra-low latency but over much shorter distances with line-of-sight challenges. What made the C-Band auction compelling were its coveted mid-band spectrum assets and the sheer quantity of them available for purchase. However, there are challenges with the deployment of these spectrum assets. Let us dive into those details further.
C-Band challenges
From my perspective, C-Band poses three challenges. First, it is in the upper range of 3.7-3.98 GHz and, as a result, will require small cell densification to realize its full potential given line of sight and building penetration challenges. Densification will increase capital expenditures for AT&T and Verizon that both bid aggressively in the auction to fill mid-band gaps. Second, operators have had to activate incremental credit facilities to finance spectrum purchases. Case in point, AT&T has made it known through a recent SEC Form 8-K filing that it sought a $14.7B loan with Bank of America. These multi-billion-dollar spectrum expenditures add to an already expensive investment in 5G infrastructure that AT&T and Verizon have explicitly stated is north of $20B each. The real danger is that deployment could slow as a result of having to manage capital and operational expenses more carefully. Finally, there are significant hurdles in local zoning restrictions for small cell deployment and convincing less tech-savvy local government leaders that a proliferation of 5G small cells does not pose any health risks. I know first-hand that a tier-one operator’s 5G deployment efforts in my hometown of Austin, Texas, have been thwarted as a result of the latter.
Wrapping up
Carriers in this country are spending billions of dollars in hardware and software cellular networking infrastructure to deploy a range of spectrum—all in the hopes of being first to monetize 5G use cases. The escalating cost of spectrum compounds these expenses and must be amortized somewhere – likely in the form of higher subscriber pricing. In my opinion, the FCC should balance filling the government coffers with ensuring broad access to licensed spectrum. The negative effect of spiraling spectrum auctions could slow carrier 5G rollouts, increase subscriber cost, and weaken the United States’ ability to leverage the new standard as a disruptive economic lever.
Will Townsend is a Senior Analyst that manages Networking Infrastructure and Carrier Services practice at Moor Insights & Strategy. Mr. Townsend advises some of the largest networking infrastructure providers and carriers in the world. He has been featured on NPR, CNBC, in the Wall Street Journal, providing insights into enterprise networking and 5G. Mr. Townsend is also considered one of the top networking analysts in the world.
