There are growing signs that communications spectrum value, and prices, are undergoing a reset. The recent India spectrum auction generated about 11 percent of what the government expected. So far, bids for U.S. 600-MHz spectrum have missed expectations. That was recently the case in Egypt as well, where mobile operators flatly disagreed with the government about spectrum value, and refused to bid.
At the same time, mobile and other service providers are using the second of two major tools traditionally employed to increase the effective amount of spectrum they can deploy. Historically, additional spectrum or smaller cells are the primary tools by which mobile service providers have increased capacity. In addition, unlicensed spectrum has emerged as a third major tool (traffic offload).
As we approach the 5G era, the amount of new spectrum available is set to increase even more, the use of small cells to intensify and reliance on unlicensed spectrum will increase as well. In the U.S. market and perhaps some others, shared spectrum also will be enabled, adding yet one more tool for increasing capacity at lower cost.
The U.S. Federal Communications, as part of planning for 5G services, is opening up nearly 11 GHz of new spectrum for mobile and fixed wireless broadband, including 3.85 GHz of licensed spectrum and 7 GHz of unlicensed spectrum, and is exploring additional allocations as well.
In addition, there are reasonable expectations that spectrum owned by Sprint, T-Mobile US and Dish Networks also will be available for acquisition (either by purchase of the firms or, in the case of Dish, a possible sale of airwaves).
That should lead potential bidders to adjust their expectations about the amounts they are willing to bid to acquire 600-MHz spectrum in the ongoing incentive auctions. Up to this point, through two rounds of bidding, bids have significantly lagged seller expectations. So it is not an idle spectrum to ask whether the value of spectrum now is changing radically.
In other words, spectrum value has to change, if supply increases so much, and if other methods are available to increase supply by using newer network architectures (small cells), using more-efficient radios and antennae and continuing to rely on unlicensed spectrum that carries no direct spectrum cost. In fact, such trends suggesting lower spectrum valuation has been underway for a couple of years.
Consider just the expansion of supply in the U.S. market. The FCC already has announced it plans to release 11 gigahertz of new spectrum, including healthy amounts of unlicensed spectrum, and significant amounts of shared spectrum, in a couple of bands.
Licensed use in the 28 GHz, 37 GHz and 39 GHz bands makes available 3.85 GHz of licensed, flexible use spectrum, which is more than four times the amount of flexible use spectrum the FCC has licensed to date, for all mobile purposes.
Unlicensed use in the 64-71 GHz band makes available 7 GHz of unlicensed spectrum which, when combined with the existing high-band unlicensed spectrum (57-64 GHz), doubles the amount of high-band unlicensed spectrum to 14 GHz of contiguous unlicensed spectrum (57-71 GHz). That 14 GHz band will be 15 times as much as all unlicensed Wi-Fi spectrum in lower bands.
Shared access in the 37-37.6 GHz band makes available 600 MHz of spectrum for dynamic shared access between different commercial users, and commercial and federal users, extending shared spectrum access in the 3.5-GHz band.
Prices are based on supply and demand. If supply increases by an order of magnitude, and demand does not keep pace, wholesale and possibly retail prices will fall, as well.
