AWS-3 Auction: Lessons Learned

From my perspective, the particular recent AWS-3 auction has to be deemed an overall success. It is hard to say otherwise when it released 65 megahertz of spectrum for more efficient purposes, allocated 1611 licenses to present and prospective wireless providers to expand wireless broadband services, plus grossed revenues totaling $44. 9billion (net revenues are estimated on $41. 3 billion). Nonetheless, this particular auction highlighted many important issues and raised quite a few concerns. Here are a few takeaways that will help shape my views as we consider future spectrum plan.

Certified vs . Unlicensed Spectrum . This auction clearly demonstrates there is still a critical need for licensed range in our overall spectrum framework. Even though some argue that the future lies only along with unlicensed or shared spectrum, this particular view ignores the fact that our nation’s commercial wireless carriers still seek exclusive spectrum in order to be able to maintain quality of service and network control. The simple proof of this is the putting in a bid activity, extensive bidding rounds and the final revenue figures for the AWS-3 auction. Having waited almost seven years since the 700 MHz auction and facing huge projected growth in wireless data usage, individuals fought for eleven weeks to win the exclusive right to make use of the available licenses. And these entities, together with those that didn’t participate or earn large numbers of licenses, are reportedly looking closely at the broadcast incentive auction to acquire additional certified spectrum.

Paired vs . Unpaired Spectrum . As I have got said before, I think the Fee, and the American people, lost an opportunity by not finding appropriate range to complement the A1 and B1 blocks. Specifically, the Commission should have paired this 15 megahertz of spectrum, instead of offering 5 plus 10 megahertz unpaired spectrum permit. By some accounts, this decision may have cost the taxpayer as much as $21 billion in revenues. Just compare the valuations in this auction: 10 megahertz of unpaired range (the B1 block) garnered almost $2. 3 billion in major revenues, whereas 10 megahertz of paired spectrum ( we. e. , 5 megahertz uplink and 5 megahertz downlink) auctioned in the same market areas (the H and I blocks) raised approximately $8. 4 billion. Meanwhile, when the 10 megahertz was paired to produce a 20 megahertz license, it wouldn’t be unrealistic to imagine that it may have raised upwards of $18. 2 billion dollars in gross revenues, which was the cost for all of the 20 megahertz paired licenses (J block).

This auction reaffirms my belief that we should have sought Congressional action to make any necessary changes to the law in order to facilitate an appropriate pairing. Alas, we did not even try. At least for the immediate term, the particular Commission must seek to auction paired blocks.

Location Still Matters . This auction confirmed the value of the value generated from permit in the largest markets. As expected, the particular licenses covering the top 30 metropolitan areas, which account for approximately 10 percent of the licenses offered, brought in 79 percent of the overall gross revenues.[1]This is nothing against medium- or even small-sized markets, but this fact is important as the Commission looks towards the incentive auction and issues raised by potential market impairments. In particular, the Commission must create as much revenue as possible from the larger markets in order to make the substantial economic offers to broadcasters that would justify turning in their licenses. Accordingly, there ought to be a recognition that unless essential, market impairments – especially in the larger markets – must be prohibited or even severely limited. Auction participants are usually unlikely to bid meaningful amounts in the forward auction if the permit are encumbered, and this is a lot more significant given the Commission’s wish to maintain its flawed “unreserved” and “reserved” categorizations. In other words, if we expect entities to bid high, we can not offer them cluttered licenses. In addition , we must keep in mind the recent results of the Canadian AWS-3 auction in which the “reserved” licenses for new entrants were purchased at a significant discount, potentially losing billions of dollars for taxpayers.

Low-Band vs . Mid-Band Spectrum . The overall revenues of this auction furthermore cast doubt on some quotes of the unappreciated value of mid-band range. Mid-band is clearly more useful than some would like you to think. Despite the increased cost of buildout – a reality of physics – with regard to mid-band spectrum, bidders still terribly wanted it. These entities knew the expected buildout costs, required them into account when formulating putting in a bid strategies, and still bid almost $45 billion. It is a fallacy to claim that low-band spectrum is the key to long term network architecture and wireless providers are unable to operate without it.

Designated Entities . The Commission should rethink its designated entity guidelines. As Commissioner Pai and others have got highlighted, the rules in place for this auction permitted two entities with 85 percent investment from a large, well-financed company to win 702 permit and apply for a $3. 3 billion dollars subsidy to offset part of their collective $13. 3 billion within bids. This company was able to use this framework to outbid not only small businesses plus rural telephone companies, but also some of the country’s largest wireless providers. In case these bidding credits are granted, which I take no position on at the current time, the rules will allow these licenses to be “flipped” to a different company after five years without having repaying a penny of the subsidy. In case early analysis is correct, the particular Commission must thoroughly review the particular contractual arrangements and coordinated putting in a bid activity. And, the full Commission ought to vote on whether to offer the subsidy. Moreover, this exercise should put a final end to any plans to loosen our DE rules. In fact , the Commission ought to give serious thought to strengthening these permissive rules and the current buildout requirements.

Planning Ahead . To ensure ongoing growth and innovation in America’s renowned wireless sector, we must identify now the spectrum bands that could be auctioned for exclusive use in the long run. We no longer have the luxury of avoiding the issue of fallow spectrum. Like AWS-3 and the coming 600 Megahertz auction, much of tomorrow’s licensed range will have to be reallocated from other uses, such as from the federal government or broadcast licensees. Clearing spectrum and resolving disturbance issues take time. We must start this technique now to have a firm plan in place to ensure that we have adequate spectrum in the pipeline for the next demand routine.




[1] The permit included in these calculations are those that cover the 30 largest City Statistical Areas according to U. S i9000. Census estimates. Find U. S. Department of Commerce, United States Census Agency, American FactFinder, Quotes of Resident Population Change plus Rankings: July 1, 2012 to July 1, 2013 – Usa – Metropolitan Statistical Area; and for Puerto Rico , http://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=bkmk (last visited Mar. 25, 2015). The licenses covering the top 10 (3. seven percent of all licenses) and top 20 (6. 8 percent of most licenses) markets accounted for 55 percent and 69 percent of the overall revenues, respectively.


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