FCC C-Band Auction 107 Outcome and Consequences

By | January 15, 2021
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Update: The assignment phase concluded since I wrote this post. You can download summary of the results by entering your name and email here.

5G spectrum auction valuation benchmarks C-Band Auction 107

The clock phase for FCC C-Band Auction 107 has concluded in 97-rounds raising a record $80.92 Billion. The auction moves to the assignment phase. The proceeds exclude up to $13 B in additional fees and incentives for satellite operators to clear the band. This makes the C-band auction the largest grossing auction in history, beating Auction 97 for 65 MHz in AWS-3 band which had raised $45 B in 2015 [here].

Clock phase results for the FCC C-band auction.

I called this auction a “monster auction”. No one thought it could reach such valuation. The national average price of $0.94233 per MHz-PoP is similar to what one would expect for price in the low bands. Multiply by 280 MHz of spectrum, you get this astronomical figure.

FCC C-Band auction 107 end of clock phase
C-Band auction summary - end of clock phase.
Under Pressure and Short on 5G Spectrum

The need for mid-band spectrum is particularly acute among US operators. The merger of T-Mobile-Sprint gave T-Mobile an advantage in mid-band spectrum that’s ideal to deliver peak 5G throughput on the order of Gbps. Verizon and AT&T had no choice but to acquire as much C-band spectrum as their financials would allow. It will still be a few weeks before we know the winning bidders to see how Dish, the cable consortia and others have fared – so more on that later.

The 10.6% premium price paid for the A blocks over that for the B and C blocks reflects the urgency for spectrum. The A blocks will be available by December 2021, two years earlier than the B and C blocks.

In my pre-holiday auction update, I mentioned the specific urgency for Verizon in particular which has put high emphasis on speed targeting the business consumer. This explains it mmWave deployment strategy and venture into edge computing. AT&T faces similar competitive pressure as Verizon but has higher financial stress because of its debt. AT&T is not as aggressive on mmWave roll out, and while it has been engaged in edge computing co-services with cloud operators, Verizon has a head-start.

FCC C-Band Auction 107 comparison with prior spectrum auctions.
C-Band Auction 107 proceeds in comparison with prior spectrum auctions (post clock phase; excluding satellite relocation expenses).
Consequences to C-Band Auction 107

The first question is whether the spending was rational and can be supported by the business case for 5G services. The closest example to this were 3G European auctions around 2000. Massive spending by the standard of that time slowed Europe’s roll out of 3G services cascading into delays in 4G services.

I don’t think this will happen in this case, as US operators are under pressure to deploy 5G for both competitive and operational reasons - they need a capacity layer in some of the urban centres. We need to wait for the winners’ spending to gauge the impact on each operator. In the meantime, some likely side-effects to the results of this spectrum auction are:

  • Deployments of mobile mmWave would slow significantly or even end altogether. The budgets will be too strained to continue with the “small cell” architecture for mobility services which has not proved to be economically viable. For fixed wireless services, 3.5 GHz could provide 1+ Gbps peak speed with better range than mmWave, and with better user self-install capability. Even as Verizon has 30% truck role rate, they can take that down to 0% with C-band spectrum.
  • Verizon would limit the deployment of CBRS frequencies for potential enterprise networks instead of the public consumer network.
  • DSS will become redundant. It was after all a marketing gimmick to claim 5G service capability. There are some use cases for DSS, but not in the way used by US operators.
Concluding Remarks

Looking at the auction from a Canadian perspective, C-band Auction 107 will set the stage for higher valuation in the upcoming Canadian 3.4 GHz auction now scheduled for June ’21. In particular, incumbent operators will feel more pressure to pay higher price. The auction is arranged in a way that could lead to high valuation, particularly for the three major urban areas (Toronto, Montreal, Vancouver). The reserve price for these areas is already set at C$0.21 and given the amount of spectrum available, it can quickly get very pricy. These three markets alone could fetch 70% or higher of the entire proceeds! The government, having delayed the auction from last year, would probably feel happy about the decision now. In hindsight, the service providers should have lobbied hard against the postponement.

This article first published on December 23, 2020 as update to round 45. Updated on January 15, 2021 to reflect clock round proceeds.