The Road to the C-band Auction
(The following article is Volume 4 of the 13-part Broadband Game-Changer Series, brought you by Adara Technologies)
It’s been over two years since the FCC voted to open the lower 300MHz of the C-band for 5G, and we’re now less than two months away from seeing the Dec 8 start of an auction that promises to generate a significant amount of revenue. Analysts at Morgan Stanley Research recently raised their C-band mid-point auction forecasts to approximately $26bln in proceeds, with high-end estimates clocking in at $35.2bln.
Mobile operators have long desired the C-band, a wide swath of spectrum ranging from 3.7-4.2GHz, due to its propagation capabilities. Until now, it has been used by satellite operators to deliver video and other content. The FCC has offered a lump sum payment to MVPDs using the band for video delivery that are choosing to handle their own transition responsibilities or transition to other technologies.
It is no surprise that programmers and operators alike had plenty of questions on how the transition would occur, how service disruptions will be prevented and how incumbent earth station operators would be compensated for their own C-band relocation expenses.
ACA Connects asked the Commission in July to include the costs of integrated receiver/decoders in that lump sum as that would allow MVPDs to replace their existing earth stations with fiber-based alternatives more easily. The Wireless Telecommunications Bureau refused, which led the association to ask the DC Circuit to review the FCC’s decision and for a stay the deadline for incumbent earth station operators to elect to receive the lump-sum payment.
The DC Circuit denied the order in September, but ACA Connects said it is considering its options going forward and has continued to offer its members resources on the C-band reclamation process.
As for the current happenings at the Commission, the FCC is allowing eligible C-band satellite operators to modify their transition plans, which were due to be filed by Aug 14.
“Because final Transition Plans were due a month before incumbent earth station operators made their lump sum elections, eligible space station operators did not know which earth station operators would elect the lump sum and assume responsibility for transitioning their own earth station,” the FCC said in a public notice. “Therefore, now that incumbent earth station operators have made their lump-sum elections, we expect that eligible earth station operators will need to modify their Transition Plans to remove the incumbent earth stations for which the space station operators are no longer responsible for transitioning as a result of the lump sum elections.” Satellite operators have until Oct 28 to make those modifications, after which time the Commission will post an updated list of incumbent earth stations.
Many operators have already struck deals with manufacturers to build C-band replacement satellites. For example, Boeing is building two C-band replacement satellites for SES, Maxar is building five for Intelsat and Northrop Grumman is building two C-band replacement satellites for Intelsat and two for SES. SES and Intelsat are a few of the satellite operators that promised to clear 100MHz of spectrum by Dec 5, 2021, and the remaining 200 MHz by Dec 5, 2023, to receive incentive payments from the FCC. Those satellite manufacturers said during the Satellite Innovation 2020 conference earlier this month that while they’re still on track to launch the new satellites in time, they’ve faced challenges as a result of the COVID-19 pandemic.
When the day finally arrives, who can folks expect to see participating? The FCC released the initial list of bidders, and cable folks have shown up. Comcast and Charter are bidding through a 50/50 joint venture while Cox and Altice USA are both bidding independently. “Given that cable MSOs generally don’t have geographically overlapping territories, there’s a logic to bidding together, as the individual providers aren’t likely to compete with each other for geographically-based spectrum licenses,” Evercore ISI said in a Tuesday note.
All of the traditional wireless players are participating in the auction as well. Verizon has been predicted by analysts to be the most aggressive bidder in the auction, and New Street Research expects T-Mobile to acquire 60MHz of C-band spectrum in the auction.
AT&T has also long been seen as an operator that needs to participate in the auction in order to stay competitive, but the one thing that could prevent that from happening is its own balance sheet. “AT&T needs more mid-band spectrum to keep pace in 5G with T-Mobile and Verizon,” MoffettNathanson said in a recent note. “We won’t go as far to say that AT&T can’t meaningfully participate in the C-Band auction given the state of their balance sheet, but, well… it will be hard if they can’t find something to sell. In fact, it will be hard even if they can find something to sell. It simply isn’t clear where AT&T will find the borrowing capacity to buy a competitive-sized block of spectrum.”
New Street recently estimated that AT&T has approximately $6bln available to commit to the C-band auction, but the firm believes AT&T should offer up double that amount. “AT&T will either need to monetize an additional $6 billion in assets or else delay its de-leveraging target beyond 2022,” New Street said.
DISH is also on the Commission’s preliminary list, despite DISH chmn Charlie Ergen saying during the company’s 2Q20 earnings call that the company would be challenged from a balance sheet perspective if it wanted to join in the fight. It makes sense that DISH would want a piece of the C-band spectrum pie as it gears up to launch its own wireless network. New Street Research believes the other auction participants shouldn’t underestimate DISH’s determination. “Moreover, we don’t think they will be bidding just to drive up prices and annoy the other market participants; we think they will be bidding to win,” the firm said in a note.
