A Wild Week for Wireless: Spectrum-Palooza

Developments over the past week in the wireless industry were the most consequential there have been, or will be, for some time. Last Friday, the FCC announced a deal with incumbent satellite providers, paving the way for the auction of a massive amount of mid-band spectrum later this year. Three days later, U.S. District Judge Victor Marreo ruled in favor of the T-Mobile/Sprint merger, paving the way for the deal to close in April. Also on Tuesday, Samsung held its Unpacked 2020 event (nice analysis by Carolina), which marked the most significant 5G-related device announcements to date. Then yesterday, some of the air was taken out of this newsy balloon with the announcement that Mobile World Congress — the industry’s annual Barcelona confab that attracts more than 100,000 attendees and injects neatly ½ a billion Euros into Barcelona’s economy — has been canceled, a victim of the coronavirus and the steady drip of exhibitor defections that had started a week earlier.

In a word, WHEW!! Now I’d like to focus the rest of this column unpacking the significance of the C-Band deal and the approval of the T-Mobile merger.

My über theme is that we will soon be entering an entirely new framework with regard to wireless network capacity. The C-Band auction, currently scheduled to begin in December 2020, will put into play 280 MHz of spectrum in the 3.7-4.2 GHz band, known as ‘mid-band’ spectrum. Of this 280 MHz, 100 MHz will be auctioned initially, with the other 180 MHz following in about 18 months. Add to this the 70 MHz of spectrum in the CBRS (3.5 GHz) PAL auctions scheduled for June 2020, and we’ll have 350 MHz of mid-band spectrum becoming available over the next 2-3 years, in stages. This is a dramatic amount of spectrum, in a favorable part of the band — good for both coverage and performance (note that there are little asterisks next to each of these bands: there are power limits for 3.5 GHz, and for the C-Band, a complex process of moving incumbents to another part of the spectrum band. But these are surmountable).

On top of this, New T-Mobile gets Sprint’s 150 MHz of 2.5 GHz spectrum, which is the most consequential aspect of the deal for both the industry and for consumers. Played right, T-Mobile now has the ability to build a pretty killer 5G network, delivering both depth (hence, speed and capacity), plus breadth (coverage, in the 600 MHz and 700 MHz bands). It is, instantly, competitive with AT&T and Verizon from the standpoint of potential network capacity.

This series of events is also a big step for U.S. competitiveness and the 5G industrial policy arms race that is now well underway.

We also have the creation of a fourth national player, in the form of DISH. As we all know, DISH has been amassing spectrum (mainly in the 700 MHz band) for several years, although to the consternation of many, the company has been mainly sitting on these assets. As part of the T-Mobile deal, DISH gets Sprint’s 800 MHz holdings, access to 20,000 cell sites, a guaranteed MVNO deal with T-Mobile for seven years, 8 million Boost and Virgin Mobile subscribers…and a requirement to actually build out some of its spectrum, thus moving toward being a facilities-based service provider, at least in part, over the next 3-4 years.

So, we have a pretty dramatic reshaping of the industry, almost overnight. First, over the next 2-3 years, as all of this spectrum is auctioned, transferred, and actually put to work, we are going to move from a framework of spectrum scarcity to spectrum sufficiency, or, dare I say it, spectrum abundance. This will, clearly, allow service providers to carry vastly more data on their networks at a much lower cost per gigabyte. Beyond the obvious benefits of potentially lower prices or the upping of data ‘limits’, this added capacity, combined with 5G New Radio, edge computing, and some of the additional benefits planned for 3GPP Release 16 and beyond, are what gets us into the territory of the 5G vision that we’ve been hearing about now for a few years.

This new network capacity also opens up new market opportunities. For example, T-Mobile has promised that it will offer a competitive broadband service (100 Mbps+) to more than half the country’s households by 2024. For enterprises, private LTE and 5G networks could offer a viable alternative to Wi-Fi, in terms of both coverage and capacity.

This new industry structure will also lead to a new wave of potential competitors. In my 30+ years as an industry analyst, the perambulations over the ‘four to three’ implications of the T-Mobile/Sprint deal were an amazing curiosity, given that more than 50% of U.S. households only have one [decent] broadband provider from which to choose. But with all this new spectrum, mobile operators will be more incented to open up shop to third parties. DISH’s approach is likely to focus more on operating a wholesale business. Once could see Amazon, or some other FANG-esque anchor tenant on their network.

This also changes the calculus for the cable companies. On the one hand, they might face greater competition for their broadband business from Verizon, T-Mobile, and others over the coming years. On the other hand, this spectrum-palooza gives them much greater opportunity to play in the wireless space. They will have new alternatives to the currently not-that-favorable MVNO prices from Verizon. They’re likely to pursue a hybrid network approach, relying on a blend of Wi-Fi, select small cell deployments in mid-band spectrum (acquired in the PAL or C-Band auctions), and spreading their business to multiple wholesale hosts.

The T-Mobile deal approval and the C-Band announcement have set the table. During 2020, we’ll see the conclusion of the mmWave auctions, the CBRS PAL auction, and the first stage of the C-Band process. Those who spent the past several years concerned that industry consolidation would lead to less competition and higher prices will be looking in the rear-view mirror, as we see the emergence of a new competitive landscape for mobile and broadband services.