Will U.S. 600-MHz Auction Prices Fail to Meet Expectations? Likely.

Though virtually every Internet service or mobile service provider will need more capacity over time, the ways ISPs create capacity, and the need to buy licensed spectrum assets, is less linear than once was the case.

Though network architects always have several tools to increase effective capacity--additional spectrum, smaller cells, better modulation, radios and air interfaces, traffic offload, end user traffic shaping--it typically has been the case that big carriers relied on licensed spectrum as a key tool.

They still do so, but there now are a growing range of tools for increasing capacity that might not require as much new licensed inventory, or licensed inventory that costs as much. It is a simple matter of supply and demand.

In the U.S. market, vast increases in supply are on the way. So, as with any commodity, prices should fall as supply grows significantly.

For AT&T, tactical considerations, more than grand strategy, might affect willingness to bid heavily for 600-MHz spectrum assets. But Verizon, which arguably has greater need for additional spectrum assets, also has said it is not compelled to bid heavily for 600-MHz assets.

Still, the larger strategic context likely is relevant. Service providers large and small know that, in the future, huge new amounts of spectrum--unlicensed and licensed--are going to be made available.

That knowledge alone, plus major advances in small cell platforms, offloading and other technology advances, should be combining to reduce the perceived value of new spectrum assets. That, in turn, should reduce the value of new blocks of spectrum, and hence retail price.

That should be a material force in Internet access provider strategy and tactics, both near term and longer term. Verizon, for example, seems to be charging ahead with its 5G network commercial launch, as early as 2017.

That should be the start of a major transformation. For the first time, commercial bandwidth prices--supplied by fixed or mobile networks--should be matters of relative indifference. That is radically new.

In substantial part, that transformation will be enabled by availability of unprecedented amounts of new spectrum, much-better platforms and new business models for access assets.