In Business Model, Internet Access, Mobile, Spectrum

The U.S. Federal Communications Commission is  leaning against a smaller company spectrum reserve in the upcoming 600-MHz spectrum auctions, according to a Reuters report.

T-Mobile US and others have been arguing for such a spectrum reserve, of up to 40  percent of the total spectrum, for smaller carriers that do not have licenses to use much lower-band spectrum (800 MHz and lower frequencies).

Some argue the spectrum set asides are not needed. Others might argue that reserving spectrum for smaller providers does not work.

The FCC faces a problem, however. The two-stage auction process will work best if high prices are expected. That will cause more broadcast license holders to sell their spectrum.

A spectrum reserve will lead to lower prices, as it bars AT&T and Verizon, the firms with the deepest pockets, from bidding on a substantial portion of the spectrum. Less competition means lower prices.

For that reason, the FCC might be stuck. It might otherwise create the set asides. But doing so imperils the auctions. Licensees must first be persuaded to sell, and they will do so only if the prices are high.

Set asides pressure prices, causing less spectrum to be made available. So logic suggests promising license holders attractive prices, so they can sell. Only then can the buyers act.

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