126 MHz in 600-MHz Band Set for Auction

U.S. TV broadcasters have agreed to sell 126 MHz of spectrum in the 600 MHz band, allowing a reverse auction to begin that will set market clearing prices for the various 10-MHz blocks of spectrum in various geographies nearly able to cover the whole United States.

There always is a chance the auction could propel a new “national” provider into the mobile business, though the huge amount of capital required, and the fierceness of competition in the mostly-saturated U.S. mobile market makes that an unlikely possibility.

Most likely, the big winners will be AT&T, Verizon and T-Mobile. Even though Verizon has suggested it might be cautious about bidding, AT&T and Verizon typically have the greatest incentive, and the biggest war chests, to win most of the new spectrum being allocated, and Sprint will not be bidding.

T-Mobile US, on the other hand, will be able to compete without facing AT&T and Verizon in most of its areas, as T-Mobile US is able to bid on reserved spectrum that largely keeps AT&T and Verizon from countering.

Some smaller local or regional bidders are expected, though. A variety of business models could make sense, in that regard. There remain some regional mobile operators who have primary interests only in only parts of the national geography.

And there always are some bidders who will hope to flip the spectrum to another motivated buyer.

It always is possible a new entrant could try and win enough spectrum to assemble a national network. Such a new entrant most likely would not be aiming to compete in the traditional mobile network, however.

More likely is an alternative approach, perhaps based on assembling a national network that support Internet of Things connections specifically. The reason is that many IoT apps will not require lots of bandwidth, so a 10-MHz national network might be able to create a sustainable revenue model.

Also, the 600-MHz frequencies will have very-good signal coverage characteristics, which translates into lower tower and radio capital spending, and lower power requirements for remote connected devices or sensors.

But such gambits (buying general purpose mobile spectrum to deploy for niche apps) always are highly risky. Even would-be providers of “wholesale capacity” networks, often a business model considered when new entrants ponder acquiring mobile spectrum, most often back away after a serious examination of the business model.

Whether all the spectrum will actually be purchased is the issue. Some have suggested the auction would eventually raise $60 billion. Others believe that is overly optimistic. With the exception of T-Mobile US, which is likely to bid heavily to win new spectrum, most other bidders will evaluate bids in light of other ways to acquire additional spectrum, especially if the need now is "capacity" rather than "reach" or "coverage."