Supply and demand always have shaped the value of mobile and other communications spectrum. For most of recent history, scarcity has been the key fact. Licensed spectrum has been relatively scarce. But that is changing. As unlicensed spectrum becomes a key part of the access fabric, as more unlicensed spectrum, shared spectrum and licensed spectrum become available, supply is going to become much less scarce.
Potential buyers seem to be indicating by their spending that they believe this is the case. Witness the recent huge spectrum auctions in India, where proceeds were about 11 percent of what the government expected. The same trend seems to be happening in the United States, as well.
The fourth stage of the Federal Communications Commission’s incentive auction to repurpose former 600-MHz TV broadcast spectrum has begun. Three earlier efforts to match buyer and seller expectations failed to “clear,” and each time a smaller amount of spectrum and lower minimum prices have been set.
At stake in the present auction is 84 MHz of spectrum. The FCC originally hoped to auction off about 126 MHz worth of spectrum. Some observers predict the auction ultimately will sell for only about $20 billion. Originally, many believed the auction would raise $88 billion.
In addition to other ways to secure required spectrum, the auction design, which generally limits AT&T and Verizon from bidding on about 30 MHz of spectrum, also means those firms have some incentive not to trigger the set-aside spectrum, which kicks in once 70 MHz of total spectrum are sold.
Because the two biggest potential bidders cannot acquire that 30-MHz of set-aside spectrum, other bidders, such as T-Mobile US, Comcast or others, stand to get their spectrum at lower prices than will AT&T and Verizon.
Beyond all that, new shared spectrum is coming, first in the 3.5-GHz bands, and then in the form of huge allocations of new licensed and unlicensed spectrum to support 5G, dwarfing the total amount of spectrum already allocated for mobile, fixed wireless and Wi-Fi applications. In some markets, such as the United States, that might mean a couple of orders of magnitude more spectrum than presentlyis available for use.
That is going to change perceptions of spectrum value (especially the price).