Takeaways from CBRS Auction and Implications for the C-Band

The 3.5 GHz CBRS PAL auctions were concluded on August 26, and the winners were announced a week later. Overall, the auction raised $4.4 billion, which was slightly above what many analysts had expected. The big winners: Verizon, DISH, Comcast, and Charter. Also interestingly, a number of enterprises also won licenses, which demonstrates the interest to deploy private wireless networks as a complement to/replacement for Wi-Fi and for certain specialized applications.

Here’s my take on the winners and losers in the auction, what it means for 5G and the competitive structure of the wireless industry, and the implications on the even more consequential C-Band auction, which is scheduled to start on December 8.

As a quick backgrounder, the FCC has made 150 MHz of spectrum available in the 3550-3700 MHz band, or the 3.5 GHz CBRS ‘mid-band’. This band, incidentally, is also being used for 5G in many other countries. The initial phase of the CBRS auction, called the GAA layer, consists of 80 MHz of shared spectrum, meaning that it can be used by anyone (i.e. not auctioned) as long as it’s available, through a regime managed by four spectrum database administrators (SASs). The GAA layer became commercially available in late 2019, and so far has been used for mainly corporate or venue type deployments.

The second phase was the 70 MHz PAL auction (called Auction 105), for 10 year licenses, in 10 MHz channels, on a county-by-county basis. A provider could bid for up to 40 MHz in a particular geographic region. That auction concluded on August 26. Of the $4.4 billion spent on the auction, Verizon was the big winner, spending $1.9 billion. DISH spent $913 million, Comcast spent $458 million, and Charter spent $212 million. T-Mobile only won a handful of licenses, and AT&T did not win any licenses at all.

The auction was especially critical for Verizon, which is in the weakest spectrum position of all the major operators, especially in the mid-band. I expect its 3.5 GHz efforts are a precursor to what will be a more significant spend in the C-band auction, where 280 MHz of spectrum in the 3.7-4.2 GHz band will be made available.

The magnitude of DISH’s spend was a bit of a surprise, given DISH’s already strong spectrum position and its rather precarious cash situation, as the company bleeds pay TV subscribers. But it’s an important signal of DISH’s commitment to being in the wireless business. In addition to its treasure trove of low-band spectrum, DISH reaped the spoils of the T-Mobile-Sprint merger, getting some of the excess spectrum, Boost Mobile from Sprint, and an MVNO relationship with T-Mobile. So DISH is now a bona fide retail player in the prepaid wireless space, with 9 million Boost subscribers (and 270,000 from the recently acquired Ting), with plans to build a nationwide 5G network in what is likely to be a hybrid of retail/wholesale strategy.

The cable companies were the other notable winners in the auction. Cable — mainly Comcast (Xfinity Mobile), Charter (Spectrum Mobile), and Altice — have been steadily growing their wireless business, counting some 4 million wireless subscribers between them. However, their mobile business relies on the several million Wi-Fi hotspots and an MVNO relationship with Verizon (Altice’s is through T-Mobile). Their participation in the PAL auction is the first time the cable companies have acquired a meaningful amount of wireless spectrum, enabling them to add some physical cellular infrastructure to complement their Wi-Fi/MVNO strategy. It demonstrates their commitment to being in the mobile space, and their desire to be less dependent on the MVNO structure, given the rather unfavorable economics.

T-Mobile’s relative lack of participation in the 3.5 GHz auction was no big surprise, given its strong mid-band position by virtue of the 150 MHz of 2.5 GHz spectrum it got from Sprint. AT&T was conspicuously absent from the CBRS auction. We suspect they’re saving their powder for the C-band auction.

Outside of the major operators, this was also a successful auction in bringing in some new, innovative players. Among the winners were:

  • Several Wireless Internet Service Providers (WISPs), some of them already using the GAA spectrum, who will use it to provide rural broadband using fixed wireless access (FWA). They’re also counting on additional funds being made available for rural broadband initiatives, an idea that’s gained steam in the wake of Covid and the need to narrow the digital divide.
  • Numerous private companies. A 10 MHz license is sufficient bandwidth for a company to deploy a private LTE or 5G network. Among the auction winners were Deere & Company and Chevron, who could use their licenses to provide connectivity to manufacturing and other facilities that are harder to reach with Wi-Fi. Several real-estate companies also won licenses, the idea being that building or campus-wide networks could be deployed. Power companies also spent more than $50 million, collectively, on licenses, to power smart grid and IoT applications, or to use wireless as a connectivity backup.

Implications for the C-Band Auction

Given that the CBRS auction is in the mid-band, it’s viewed as somewhat of a warm-up act for the upcoming C-Band auction. This will be the largest auction in U.S. wireless history, with 280 MHz being made available in the attractive 3.7-4.2 GHz band. We expect all the major players to be there. Wall Street analysts expect this auction could raise $50 billion or more.

The auction is probably most consequential for Verizon, which still needs additional mid-band spectrum to meet 5G coverage and capacity needs. I also expect AT&T to spend big, especially since it sat out CBRS. And even though DISH and T-Mobile are in a pretty good spot spectrum-wise, it’s almost certain they’ll be active in the auction, given the attractiveness of the C-band, the seemingly insatiable need for additional capacity…and a defensive strategy to ensure that major competitors don’t end up in an overly advantageous position.

Financing will be a big story over the next three months, as the C-band auction looms. I don’t think it’s a coincidence that there have been recent rumors about AT&T potentially shedding some of its media assets, particularly DirecTV and possibly Xandr. AT&T’s balance sheet isn’t pretty. Wall Street and Elliott Management aren’t going to let AT&T go wild at the C-band auction without the means to pay for it.

DISH also needs to come up with some source of funding if it’s going to both be active in the C-band auction and spend the $10 billion (or more) required to build its 5G network. I believe that DISH’s strategy is to offer a retail wireless operation (like Verizon, AT&T, etc.) but also to run an active wholesale business, given its favorable capacity position. In fact, DISH really needs a major anchor tenant to sign a long-term deal, which would provide DISH with the resources needed to execute its wireless strategy. My bet is that it will be one of the major Internet players, such as Amazon. The cable companies are also possible candidates, as they look for more favorable MVNO terms than they currently have with Verizon. Given that DISH is a major competitor in the pay TV space, this would be among the frenemiest relationships in telecom.

Between the mmWave auctions completed earlier this year, the recently completed CBRS auction, the upcoming C-band auction, and the FCC’s announcement a few weeks ago that it would auction off another 100 MHz of spectrum in the 3.45-3.55 GHz band in 2021, we’re seeing an unprecedented expansion of capacity being made available for commercial wireless use. This will alter the competitive landscape and will be a catalyst for the sorts of innovative new use cases envisioned for 5G. Ensuring adequate spectrum resources for 5G is also the ante needed for being competitive on the global 5G stage.

Published by

Mark Lowenstein

Mark Lowenstein is Managing Director of Mobile Ecosystem, an advisory services firm focused on mobile and digital media. He founded and led the Yankee Group's global wireless practices and was also VP, Market Strategy at Verizon Wireless. You can follow him on Twitter at @marklowenstein and sign up for his free Lens on Wireless newsletter here.

296 thoughts on “Takeaways from CBRS Auction and Implications for the C-Band”

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