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FCC AWS auction ends at $13.9 B

Tue, 09/19/2006 - 8:27am

Copyright 2006 World Markets Research Limited
All Rights Reserved
Global Insight
September 19, 2006
By Seth Wallis-Jones
From Lexis Nexis

The Federal Communications Commission's auction of spectrum for use by Advanced Wireless Services (AWS) has ended with bids totaling US$13.9 billion, just short of the hoped-for US$15.0 billion.

The auction of 1,122 licences for spectrum in the 1710-1755 MHz and 2110-2155 MHz bands for the operation of both fixed and mobile services has now closed. Beginning on 10 August, the auction raised a total of US$13.9 billion, US$13.7 billion after discounts, just shy of the hoped-for US$15.0 billion.

With the Federal Communications Commission (FCC) holding back 35 licences, 104 bidders won the remaining 1,087 licences. The top bidders in the auction are as follows:

AWS Spectrum Auction

Company/Net Total (millions)/Population* (millions)

T-Mobile   US$4,182   475
Verizon Wireless   US$2,809   192
SpectrumCo LLC   US$2,378   267
MetroPCS AWS LLC   US$1,391  144
Cingular AWS LLC   US$1,335  199
Cricket Licensee Inc.   US$710  118
Denali Spectrum License LLC   US$274  58
Barat Wireless LP   US$127  42
AWS Wireless   US$116  60
Atlantic Wireless   US$75  35

*Each licence covers a calculated population. Some licensees will have purchased multiple licences covering the same population to achieve these population figures.

Global Insight Perspective:
Significance: There are no surprises that the top five bidders consist of existing mobile operators, although this includes the unexpected SpectrumCo consortium of Sprint-Nextel with several cable operators.

Implications: This will ensure that the mobile operators, particularly T-Mobile USA,  which lacked spectrum, will have the bandwidth and geographic footprint to deliver broadband wireless services nationwide.

Outlook: With new network roll-outs sure to follow, there will be opportunities for infrastructure vendors. For the mobile phone operators, as smaller operators such as MetroPCS seek to gain market share, increased competition is likely.

Competition in some areas raised prices considerably. The major operators mainly carved up the larger regional area licences among themselves, with the most expensive licence covering the North-East going to Verizon for US$1.3 billion. Of the top 10 regional licences, 4 went to T-Mobile, 3 to Verizon, 2 to MetroPCS, and 1 to Cingular. Bidding on the smaller licence areas saw the New York City and Long Island licences going to SpectrumCo and MetroPCS for US$468 million and US$363 million, respectively.

Outlook and Implications

Increasing Competition: Enhanced regional coverage for smaller operators, including 3G operator MetroPCS, will improve their prospects for competition with the larger companies.

Fixed-Mobile: The SpectrumCo consortium has gained significant licence assets which will help roll out new services to complement the mobile offering of Sprint-Nextel and provide the cable companies Comcast, Cox, and Time-Warner with wireless capabilities.

The integration between these companies suggests potential for services that build converged fixed-mobile services, particularly with the proposed WiMAX network to be built by Sprint in existing 2.5 GHz spectrum.

New Services: Operators such as Cingular, Sprint-Nextel, and Verizon Wireless already have significant spectrum to provide mobile broadband. The purchase of spectrum by these companies may either indicate room for new service offerings, such as fixed-wireless broadband, or expectations of ever greater bandwidth requirements for enhanced video, data, and interactive services.

Satellite Not Included: Among those losing out in the auction, a consortium of the major satellite operators EchoStar and DirecTV pulled out early on, which is implicated in the possible sell-off of DirecTV by NewsCorp. With television as their core product and limited capabilities to provide data and telephony services, satellite providers are vulnerable to the increasing capabilities of the fixed and mobile network providers.

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