Are spectrum prices generally falling? Probably. In the recent auctions of 600-MHz spectrum, Dish Network believed it could acquire “in excess of $0.50 on the dollar in terms of real value for the spectrum,” said Charles Ergen, Dish Network CEO.
Looking at “where things are going,” Dish strategists say they looked at spectrum value and prices in a different way.
“We look at it on megahertz per thing, not megahertz per pop or megahertz per microprocessor,” said Ergen. “And when you do that, obviously the more densely populated cities are quite a bit of a bargain discount, if you believe our theory is right on that. So that was the strategy.”
One reason for the lower prices, however, was that the U.S. government barred AT&T and Verizon from bidding on much of the spectrum, meaning the biggest buyers were sidelined, and leading to lower prices.
On the other hand, the lower-band spectrum was more valuable for T-Mobile US and Dish than it would have been for AT&T and Verizon, which always have had significant resources in the 800-MHz band.
Also, with spectrum sharing in the 3.5-GHz region coming, plus 11 GHz of spectrum in the millimeter wave regions (including 7 GHz of unlicensed spectrum), plus the ability to acquire other blocks of spectrum other ways (Dish’s spectrum might be leased or bought, for example), mean there will be orders of magnitude more spectrum available to use.
Add to that small cell architectures and better radios that allow more-intensive reuse of any available capacity, plus offload to Wi-Fi, plus bonding of licensed and unlicensed spectrum, and one has to conclude that traditional spectrum valuation is changing.
All that means the potential value of Dish spectrum, as an asset, might not be as valuable as many have been hoping. And if the raw spectrum cannot immediately be sold, then Dish has to build a network, whether it expects to be a service provider or not.
FCC rules attached to Dish's 700 MHz E-Block licenses, acquired in 2008, now require a 70 percent buildout by March 2020. Dish has said it will build a 5G network supporting internet of things, not a network optimized for consumer smartphone use.
There could be several good reasons for Dish building the specific type of network it plans. The stated rationale for a network Dish Network says it is building, focused on internet of things, not mobile service for people, is that this is where Dish expects value creation.
Dish Network has said it will build a narrowband internet of things network, not a network optimized for humans using smartphones. Among the attributes of 5G is that is the first mobile generation built to support low-latency, low-bandwidth sensor networks as well as high-bandwidth internet access for humans using smartphones and other devices.
Ergen notes that means “things like autonomous vehicles, health care and things...that maybe won't work ideally on existing networks.”
On the other hand, that sort of network will cost less than a network optimized for higher-bandwidth smartphones.
The Dish spectrum remains valuable, no doubt. It will be put to use. By whom, for what purpose, and at what price, remain open questions.
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