The ongoing auction for Citizens Broadband Radio Service priority access licenses, now through its 47th round, tells us much about the perceived value of PAL licenses in the 3.5-GHz band. Generally speaking, the prices bid so far suggest value about the same as 2-GHz assets.
That is instructive, as some might have guessed that 3.5-GHz spectrum would be valued less than “sole licensee” low-band spectrum, in part related to the restrictions on its use (shared spectrum). That does not seem to be the case.
In part, that might be because the pool of buyers arguably is bigger than in the recent past, with cable TV companies and other new contestants having high business interest. Also, the strategic value of mid-band assets arguably is better understood, at a time when most of the real estate to be made available is in the millimeter range (with coverage restrictions).
Mid-band spectrum arguably provides the best balance of coverage and capacity.
Historically, price per MHz-POP has fallen. One might argue that is in part because of frequency impact on business cost.
The cost of deploying higher-frequency spectrum is greater than for lower frequency spectrum, in large part because many more cell sites are required. The basic rule of thumb is that shrinking the cell radius by 50 percent quadruples the number of cells.
Higher-frequency signals do not travel as far as lower-frequency signals. So higher frequency spectrum mandates use of many more cells, ranging from four to 16 times more cell sites, compared to a 4G network, when millimeter wave spectrum is used.
In other words, the higher cost of creating a high-frequency network--consumer demand being relatively inelastic--requires less-costly spectrum cost, to balance the higher investment in transmission facilities. That partly explains the lower cost per MHz-POP.
Though higher-frequency assets represent orders of magnitude more capacity per POP (bigger channels, more total spectrum, more capacity per MegaHertz), the required transmission infrastructure is more extensive.
-source: Spectrum Financial Consulting
Where “coverage spectrum” at frequencies below 1 GHz had a median price of 58 cents per MHz-POP between 2000 and 2016, capacity spectrum between 1.8 GHz and 2.6 GHz had a median price of 13 cents per MHz-POP, according to Nera Economic Consulting.
Nationally, prices average a bit over 20 cents per MHz-POP (a metric of spectrum available per potential user). Prices are much higher in some areas, though.
Prices in the big Los Angeles County market have topped 53 cents per MHz-POP. Prices in the New York City market have topped 63 cents per MHz-POP. In Washington, D.C. prices already are at 85 cents per MHz-POP.
What seems noteworthy is that nobody could be quite sure how strong demand would be for PAL licenses of highest value to mobile operators and other internet service providers. On one hand, recent prices for mid-band spectrum have been rising.
Additional shared spectrum is being made available by the Department of Defense that is adjacent to the CBRS band. That will add 100 MHz of additional contiguous spectrum, creating a 530-MHz block of spectrum for mobile and other purposes in the 3.5-GHz region.
On the other hand, PAL licenses--based on shared spectrum--arguably are less valuable than exclusive right to use licenses.
Also, we have upcoming big auctions of mid-band spectrum in the C band that represent a huge amount of new spectrum--280 MHz in the 4-GHz range--in an auction repurposing former satellite purposes. That might have been to dampen demand for CBRS to an extent.
At least so far, that has not proven to be the case. In other countries, relatively recent 2-GHz spectrum auctions produced prices in the range of five cents per MHz-POP to about 40 cents per MHz-POP. Average prices for 2-GHz spectrum have been about 22 cents per MHz-POP.
So far, that suggests national average prices for the CBRS spectrum are approaching what has been paid for other mid-band spectrum.
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