During 2019 and 2020, Verizon, AT&T, and T-Mobile acquired 73% of the millimeter wave (mmWave) licenses offered in three FCC auctions. Their combined gross bids of $9 billion accounted for 88% of the total. Just a few years earlier, these incumbent operators had begun building their mmWave portfolios through acquisitions in the secondary market. That period marked the peak of optimism for mmWave, hailed as a breakthrough solution to mobile communications’ capacity challenges. Today, the outlook has shifted significantly according to this article by LightReading. Recently, T-Mobile surrendered 520 licenses in the 28 GHz band after failing to meet FCC deployment deadlines, while US Cellular wrote off $136 million of its approximately $300 million mmWave license value. These developments signal a return to the norm for the mmWave spectrum market.
| Band (Auction) | Gross Payments (million) | Licenses Won |
|---|---|---|
| 28 GHz (101) | $702.6 | 2,965 |
| 24 GHz (102) | $2,024 | 2,904 |
| 37/39/47 GHz (103) | $7,570 | 14,142 |
| Total | $10,297 | 20,011 |
| Verizon, AT&T, T-Mobile (Gross bids) | $9,074 | 14,708 |
| % of Total | 88% | 73% |
For additional perspective, download our Insight Note: Unfulfilled Promise: Reassessing mmWave Spectrum Valuations and Shifting Use Cases
Genesis of mmWave fever
Interest in mmWave spectrum originally stemmed from its potential for fixed wireless access (FWA) services. Verizon sparked this interest in 2015 when it established 5G TF. At the time, the 3GPP was still in the early stages of standardizing 5G technology. 5G TF was Verizon’s proprietary standard for FWA using OFDMA technology. To support this plan, Verizon began acquiring mmWave spectrum assets.
The race to acquire mmWave
Verizon initiated the mmWave spectrum race with its acquisition of XO Communications in 2016, a fiber-optic company holding rights to mmWave licenses. As part of the deal, Verizon had the option to acquire NextLink, an XO affiliate with rights to mmWave licenses. Verizon exercised this option in 2017, acquiring NextLink for $500 million.
The next salvo was Verizon’s acquisition of Straight Path in 2017, a company with just 9 employees and $2.1 million in revenue, primarily from IP licensing. Straight Path held nationwide licenses in the 39 GHz band and licenses in the 28 GHz band across major markets, generating $461,000 annually in spectrum leasing revenue. However, this was not an easy acquisition. Sensing a threat, AT&T entered with its own bid for Straight Path. The bidding war concluded with a victory—if it can be called that—for Verizon at $3.1 billion [Link].
For its part, AT&T acquired FiberTower in 2017 for $207 million, gaining significant assets in the 39 GHz band, including an average of 375 MHz in the top 100 markets. When AT&T closed the deal in 2018, it announced that it “plans to use the millimeter wave spectrum obtained in the deal to help meet its goal of being the first U.S. company to introduce mobile 5G in a dozen markets by late 2018.” [Link]
Strategic Turning Point
While the mmWave race heated up between Verizon and AT&T, T-Mobile made a strategic move by acquiring Sprint in early 2018 (finalized in 2020). Through this acquisition, T-Mobile gained nearly 190 MHz of 2.5 GHz spectrum, giving it a significant advantage in deploying 5G services. As a result, T-Mobile did not need to actively pursue mmWave but still obtained some licenses through its acquisitions of Sprint and MetroPCS.
Context for Auction Valuations
The Sprint acquisition reshaped the competitive landscape, intensifying the mmWave race. Verizon, in particular, felt an urgent need to adopt mmWave mobile 5G. By then, it had quietly dropped 5G TF as the 3GPP finalized the 5G NR standards. Verizon pushed vendors to develop equipment for mobile 5G. Some, like Samsung, saw this as an opportunity to break into the global RAN market. Other vendors were less convinced of the business case but had to follow the trend. Against this backdrop, the FCC conducted Auctions 101, 102, and 103 between 2019 and 2020, covering the 28 GHz, 24 GHz, and 37/39/47 GHz bands.
Resetting Expectations
In 2021, the FCC auctioned 280 MHz of spectrum in the 3.7 GHz C-Band. This was a key opportunity for Verizon and AT&T to address their mid-band spectrum deficit compared to T-Mobile. Both operators competed to acquire a national average of approximately 160 MHz and 80 MHz, respectively. However, this came at a steep cost: Verizon paid $53.4 billion, while AT&T paid $27.7 billion. Following the auction, Verizon maintained its focus on using mmWave for mobility services, but that position has since faded.
A Perspective on Spectrum Value
The high prices paid for mmWave spectrum may not be justified based solely on its practical use cases. For example, the extremely short range of mmWave coverage makes it impractical for mobility, which relies on ubiquitous coverage. However, these expenditures could be rationalized within the context of competitive market dynamics and how financial markets assess market capitalization and enterprise value. For instance, Verizon invested over $5.7 billion in acquiring mmWave assets (partially offset by later divestments). How does that compare, though, to the potential financial impact of a perceived or actual downgrade by financial markets?
For additional information on mmWave, see my earlier post here.