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FCC spectrum auction brings in more than $34 billion in bids

Wireless companies such as AT&T and Verizon have collectively bid more than $34 billion in an FCC auction for the rights to use 65 MHz of spectrum. 

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Jose Luis Magana/AP/File
Wireless companies bid more than $44 billion in an FCC spectrum auction. Here, FCC chairman Tom Wheeler gestures during a speech in Washington, D.C.

For the world’s biggest telecommunications companies, the most valuable asset they can buy is empty space.

Of course, the value comes from what the companies can do with that empty space. For Verizon, AT&T, T-Mobile, and other wireless providers, clear frequencies – portions of the electromagnetic spectrum that aren’t being used for anything else – are intensely valuable.

Between TV and radio broadcasts, GPS, satellite communications, and government uses, free spectrum is hard to come by. That’s why wireless companies have bid more than $34 billion in a Federal Communications Commission spectrum auction, hoping to win the rights to use 65 Mhz of spectrum in blocks designated for wireless services.

Miriam Gottfried at The Wall Street Journal reports that Verizon, AT&T, and T-Mobile are the biggest bidders in this auction, and that the three companies will probably win most of the spectrum up for auction. The auction is structured so that bidding is confidential, which keeps companies from colluding with each other to keep prices low, but also makes it difficult for observers to tell who’s bidding up the price.

The telecommunications companies want the spectrum so they can speed up their mobile broadband networks by adding extra bandwidth. Mobile broadband – especially 4G LTE networks – is being used more and more by consumers, and cell phone companies have struggled to upgrade their networks to keep up with increasing demand. Having access to additional spectrum makes it easier for companies to keep their networks speedy.

The FCC set a reserve price of $10 billion for the spectrum, so $34 billion of demand is encouraging news for the Commission. Profits from the auction will go to the federal treasury. It’s worth noting that this spectrum isn’t ideal for mobile broadband use: The blocks being auctioned are between 1695 MHz and 2180 MHz, which means the signals are prone to being obstructed by buildings and other obstacles. (The best spectrum for mobile broadband use, called “beachfront property” by wireless companies, is right around 700 MHz.) And the companies who win this auction will have to share some of the spectrum with the government in certain areas. Still, additional spectrum, no matter where it’s located, can be put to good use in mobile broadband networks.

The demand shown in this auction is a good sign for another FCC auction scheduled to take place in 2016, in which TV broadcasters will voluntarily sell portions of their spectrum to wireless companies. The rules of this “incentive auction” are complex, but interest is high – the frequencies being auctioned are lower in the spectrum, making them more attractive to wireless companies. All the major wireless carriers are expected to participate; the broadcasters will get some of the proceeds while the rest will go to the government.

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