Will the US 700 MHz auction be remembered for dismembering wireless?

High spectrum price could lead to catastrophe

But of course 450 MHz might support 40 or 50 Km circumference. So that makes it ideal to use 2.5GHz in urban centers, and 450 MHz in rural markets. So why are they both worth far less than 700 MHz. One reason is equipment availability.

Increasingly in the world of cellular there are such combinations in existence already. A device may have a radio operating in 800 MHz, 900 MHz, 1.9 GHz and shortly 1.7 GHz, 2.1 GHz and 2.5 GHz, all potentially in the same device. This has come about because of the different global spectrum allocations, and the historic drift towards more dense cellular network making use of shorter and shorter wavelengths. So why is it suddenly “de rigueur” to start the spectrum direction off in a different direction towards longer wave lengths.

In the end it is more likely that a fat 2.5 GHz (90 MHz wide) will become the best way to transmit large chunks of two way mobile internet access in a town, and that networks will eventually emerge combining that with longer wavelengths (lower MHz) out of town. There are lots of combinations possible.

Which leads us to one of the first points we made, that 700 MHz is fundamentally a rural get out clause for operators that “already have” networks. It makes rural build out cheaper, more effective, and it can happen more rapidly. So that in turn makes if more valuable to companies that already have nationwide wireless networks. As a result AT&T and Verizon are likely to be the major bidders.

If they are not the major bidders, companies will have had to outbid them either for smaller regional build outs, or worse still for nationwide reach. The worst thing that can happen is that someone other than those two gets a national license and tries to build a flat 700 MHz network for both urban and rural wireless. That would be inherently less profitable than the way in which AT&T or Verizon would use the spectrum, and may lead to investors immediately realizing that they have overbid, leading to downward pressure on their share value.

The other worst case situation is that a company is successful which already has spectrum and a build out program. That just puts an unsupportable burden on their capex, with two build outs and fresh spectrum to pay for, the same result.

But in a way the success of AT&T and Verizon in these auctions is perhaps a worse scenario still, not for the rival bidders, but for US telecommunications as a whole. They have both acquired a number of local incumbent operators in the recent past, and while it might have been reasonable for such a mopping up operation to continue into the future, the availability of 700 MHz spectrum for rural wireless becoming available to these two giants, may make it preferable that instead of offering prosperous roaming agreements to the 100s of local incumbents throughout the US, the two major RBOCs could just reach into their territories with cheap 700 MHz build outs and snatch their customers away just as profitably.


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