If Spectrum Prices Are Falling, Blame The Government
The FCC's Advanced Wireless Services spectrum auction begins next week, and it's attracting a lot of attention as it's the first major spectrum auction that's happened in some time. It's also prime real estate for wireless broadband services, which is generating interest from a wide range of companies far beyond established wireless operators. But despite the high interest levels and predictions that the auction would raise as much as $15 billion for the government, analysts from one investment bank say that the price of spectrum is dropping on a per-population covered basis, estimating the auction will only generate $7 billion to $10 billion total. It's not hard to see why the prices people are willing to pay could drop, given the massive writedowns foreign operators took on their 3G licenses, as well as their ongoing trouble to generate revenues from them.However, it's worth wondering if the FCC's way of handling licenses doesn't also hold things back -- not just the amount it takes in from the auction, but the state of the US wireless landscape. The FCC breaks the licenses up into cellular market areas -- meaning they cover only a particular city or area -- rather than selling regional or national licenses. While such an approach does allow for small, locally or regionally focused companies to grab spectrum, it also forces companies looking to create nationwide networks to bid in hundreds of individual auctions, rather than competing for a single nationwide license. Such licenses could offer a lot of benefits, like using coverage requirements to stipulate broader buildouts, and they could also swell the government's coffers a bit more. The situation now has operators bidding on individual licenses that aren't typically worth much except as a part of a greater whole, attaching a significant amount of risk to each one. If operators could mollify that risk by knowing before an auction starts that if they win, they'll come out with everything, it could loosen their pursestrings. Of course, the entire idea of spectrum allocation and how it's handled in the US are due for a rethink, not just how the FCC carves the country into licenses. Update: As pointed out in the comments, the FCC is taking something of a hybrid approach with the AWS auction, selling a set of licenses split up into 734 market areas, then two sets split into 176 economic areas, then three sets split into six regional areas. Still, the point remains that the complex and often inefficient methods of spectrum allocation the FCC uses could use some re-examination.
Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.
While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.
–The Techdirt Team
Filed Under: spectrum
Reader Comments
Subscribe: RSS
View by: Time | Thread
But why auction?
[ link to this | view in chronology ]
RSA, MSA, EAG, & REAG - 90 Mhz, something for ever
[ link to this | view in chronology ]
[ link to this | view in chronology ]