Smaller Carriers Interested in 2.5 GHz Auction but Can't Outbid T-Mobile

Early signs this week are that smaller carriers may be interested in pursuing licenses in the 2.5 GHz auction, which starts July 29, as they fill in their mid-band spectrum holdings. The biggest player in the auction is still expected to be T-Mobile, which already has a dominant position in the band since its buy of Sprint, and is using 2.5 GHz for its 5G rollout. The Rural Wireless Association had a webinar Thursday on the nuts and bolts of auction participation.

“Considering that a large number of phones have the 2.5 GHz already built in, the band becomes very interesting to a good number of bidders,” Recon Analytics’ Roger Entner told us: “It’s an easy capacity boost in high traffic areas.”

“Everyone has an appetite for spectrum, at the right price, and that is what is hard to know, as no potential bidders are revealing their economic bottom lines,” emailed New Street’s Blair Levin. “If there are markets where T-Mobile doesn’t see a strong strategic rationale for ‘paying up’ for the spectrum then it may let the small carriers win a bidding war,” he said: That’s most likely in “extremely rural locations where T-Mobile never thinks it’ll deploy 2.5GHz (or where it will deploy 2.5GHz but already have way too much of it given how sparse rural usage is and will be). Even in these areas, I imagine T-Mobile bids (I assume it bids in every market), so the small carriers will see competition in any market they bid in.”

If T-Mobile decides it wants the spectrum in any market “small carriers literally can’t beat them in a bidding contest,” Levin said. “Their respective purse sizes are just different orders of magnitude,” he said.

Sasha Javid, BitPath chief operating officer, expects “relatively robust participation from smaller carriers … due to the county-sized licenses that will be available.” While “their participation will definitely create a more competitive auction,” T-Mobile, and possibly Dish Network, will likely wind up with most of the licenses, he said.

“The band is interesting to smaller carriers, because large carriers other than T-Mobile would not be able to assemble a useful footprint and so are unlikely to bid,” said spectrum consultant Tim Farrar. “With lower competition and fragmented licenses, smaller carriers would hope to be able to buy additional spectrum at a much lower price than in the recent C-band and 3.45 GHz auctions,” he said.

The band offers desirable mid-band spectrum, but carriers have to be prepared for complexities going in, speakers said on the RWA webinar.

Most major vendors offer a “plethora” of radios that use 2.5 GHz, and handsets are widely available for 4G and 5G, said David Fritz, Nokia senior consulting engineer. This isn't like C-band “where it may take some time for development of radios as well as clearing of incumbents,” he said. Fritz warned 2.5 GHz is complex. “What you need to do is look at this band on a channel-by-channel basis to understand where the existing authorizations are, where is the white space,” he said. Bidders have to “really understand if I bid on a county what is available, what is not available and what is contiguous or not contiguous,” he said.

“Do your due diligence now,” said Womble Bond’s Bob Silverman. “This is the time to start looking at how you’re going to participate and where you want to participate,” he said.

Rural Focused

Earlier this week, carrier executives said at the Competitive Carriers Association conference the band should see lots of interest.

“We like this auction” because it’s “rural focused” and county-sized licenses are “important to us,” said Brighid Riordan, CEO of Cellcom parent company Nsight. The Wisconsin-based provider doesn’t like larger partial economic area-sized licenses, she said. “We always have to look at spectrum whenever there’s an auction and we’ll definitely be participating in this one, hopefully,” she said: “We look at everything that we can possibly get our hands on.”

Appalachian Wireless CEO Allen Gillum is also pleased the FCC is offering county-size licenses and plans to participate in the auction. “We’ve had to invest quite a lot of money outside of the network area that we’ve got,” he said. “We do have enough spectrum … but we had to invest quite a bit of money upfront.”

“2.5 is really very appealing spectrum, and we were very happy with the way the FCC has set this up,” said Grant Spellmeyer, UScellular vice president-government affairs. “We have participated in almost every major auction in the last 20 years, and I’m sure we’ll take a good, hard look at this,” he said.

The FCC made the right decision to hold an ascending-clock auction, said Steve Sharkey, T-Mobile vice president-government affairs-technology and engineering policy. “It really came out to be a good format that will work well” for competitive carriers, he said.

Sharkey said the auction should be a success despite questions around the pending Sept. 30 expiration of FCC auction authority, and whether it will be extended by Congress (see 2203220066). “The auction will start and move forward, it’s really the timing of the extension,” he said: “The best case would be for the Congress to do an extension now so that everybody knows going into the auction that the authority is there and that there’s no cloud over the auction at all.”

Wireless ISPs are likely to be the main contenders for the band, beyond T-Mobile, predicted MoffettNathanson’s Craig Moffett. “Mid-band spectrum is a scarce commodity for WISPs, and 2.5 GHz has much better propagation characteristics than most of what’s available,” he said: “The chopped up nature of the geographic licenses makes it hard to use for traditional mobile service for anyone other than T-Mobile.”

If the FCC had adopted a simultaneous multi-round format, more small carriers would have been likely to participate, said Digital Progress Institute President Joel Thayer. “The FCC's decision to go with an ascending clock auction will still provide smaller carriers with a lot of opportunities to participate meaningfully, but it's undeniably an uphill battle for them to compete with T-Mobile here,” he said. Thayer said it’s positive the auction is “getting off the ground.”