C Band Appears Likely to Set New Record for FCC Spectrum Auction

The FCC’s C-band auction appears likely to become the largest FCC spectrum auction in history, surpassing the AWS-3 auction five years ago, which brought in $41.3 billion in provisionally winning bids (see 1501300051). The rising numbers likely indicate AT&T and Dish Network are joining Verizon as major bidders in the auction, experts said Monday. The auction hit $50.84 billion Monday after 38 rounds.

AT&T, Dish and the big cable operators “must all be bidding more aggressively than originally predicted,” BitPath Chief Operating Officer Sasha Javid told us. “T-Mobile may not only be bidding to drive up prices for Verizon in the A blocks, but also bidding in a significant way to acquire the B, C blocks for their own 5G deployments,” he said. You don’t get to an auction above $60 billion, “which appears where we are headed, without numerous bidders willing to spend north of $10 billion, and in the case of Verizon, north of $20 billion,” he said. The A block, which offers five 20-MHz blocks from 3.7-3.8 GHz, will be the first to be cleared and available for 5G.

“The main takeaway is that AT&T is almost certainly bidding,” said MoffettNathanson’s Craig Moffett. “We had questioned whether their balance sheet would allow them to participate, but I can’t imagine the auction could be generating this kind of momentum without their significant presence,” he said.

“While C band is on the upper edge of what could be considered midband, it clearly will be an important asset for Verizon to add to its spectrum-constrained portfolio,” said LightShed’s Walter Piecyk. "What’s interesting is that without spectrum like the L band to pair with this C-band asset, Verizon will have to materially densify its network, and add new antennas to effectively use it for 5G.”

LightShed forecasts $30 billion of midband spectrum purchases by Verizon, including the citizens broadband radio service, based on its need for spectrum and “the disappointment” of its high-band spectrum strategy, Piecyk said: “They appear to be on track to hitting our numbers. That’s much higher than the company had been indicating, and the forecast by most of our peers, who were likely being reassured by Verizon that things would not get out of hand.”

There are still 57 bidders and “nobody has dropped out,” emailed New Street’s Jonathan Chaplin. “For bidding to have reached these levels, I suspect it is more than Verizon plus one, and I don’t think Dish has the resources to be the only one pushing them,” he said. “I would assume Verizon and AT&T are competing hard for the A-block licenses and the corresponding ABC licenses. I would assume T-Mobile, Dish and others are competing hard for the BC licenses. … When the bidding for the A-block gets too high, whomever is vanquished will shift demand to the BC.”

Spectrum consultant Tim Farrar said pricing is likely being driven partly by a sense there might not be another rich vein of spectrum to be mined, especially if tech FCC is deadlocked. He said the hopes some had that the C band's remaining 200 MHz might be made available in a handful of years now seem unlikely. Farrar said the AWS-3 auction was driven largely by big AT&T demand, but AT&T and Verizon demand for as much as 100 MHz blocks each could also be pushing auction pricing. Others beyond those two may be aggressively bidding to drive up prices, he said.

Farrar said the most expensive licenses will likely be taken care of by sometime Tuesday, with bidding then moving on to lower-ranking markets. He said heavy demand for A-block spectrum, even though it carries extra financial burdens of acceleration payments, indicates bidders -- presumably AT&T and Verizon -- are putting a big premium on having access to spectrum quickly. He said A-block spectrum will be more expensive than B and C block, even before relocation costs are factored in.

More than 90% of the markets with A-block spectrum that will be cleared next year have been increasing every round, and it appears likely that two to three bidders are driving up pricing with an average of two bids above the available five blocks in A block, emailed Recon Analytics analyst Don Kellogg. It's notable that bidding on smaller markets started so early at around round 10 and the winnowing seen in the top 50 markets hasn't yet happened in less populated markets, he said: "Buckle up -- we have a ways to go before this auction is settled."