The results are out! After conducting the assignment phase relatively quickly, the FCC has now also published the highly anticipated results from its C-band auction (Auction 107; 3.7-3.98GHz).
Verizon emerged as the largest spender in the auction, accounting for more than half of the auction proceeds. Together with the estimated payments to satellite operators (PSOs1), the operator’s total auction bill amounts to USD53 billion.
The two other major spenders were AT&T and T-Mobile, with total bills (incl. PSOs) of USD27 billion and USD11 billion respectively. The round-up of the top five bidders is completed by the local mobile operator US Cellular and the private equity company Grain Management, each with an auction bill of USD1.5 billion (incl. PSO).
Figure 1: Auction spending per operator (incl. PSO) [Source: FCC, Aetha]
Surprisingly, the duo of cable operators – Charter Communications and Comcast, which entered the auction through a joint venture, did not win any spectrum and did not even place a single bid. Dish, on the other hand, won only one licence – 20MHz of 3.7GHz spectrum in PEA257 (Cheyenne, WY) – that costs just USD3 million (incl. PSO).
Bidders are required to make their payments in two instalments, with the first one (20% minus their upfront payment) due by 10 March and the second (80%) one due by 24 March 2021.
As seen from Figure 2 below, Verizon won about 160MHz (on an equivalent nationwide basis; weighted by population per PEA), followed by AT&T with about half as much. Together they bought around 240MHz of the total 280MHz available. The two operators were the only ones to win Product A spectrum2, which is due to become available in December 2021 (two years before the remaining spectrum). Verizon won 60MHz and AT&T 40MHz in each of the PEAs with Product A.
This was an expected outcome given their relatively limited mid-band spectrum holdings prior to the auction. With its 2.5GHz spectrum holdings (from the acquisition of Sprint), T-Mobile did not have as large an appetite for 3.7GHz spectrum and therefore was happy to leave the auction with around 30MHz spectrum on a nationwide basis.
Figure 2: Equivalent nationwide spectrum won per bidder [Source: FCC, Aetha]
The blended prices (in USD/MHz/Pop) paid by each of the main bidders were largely similar, with T-Mobile and Grain Management spending on MHz-Pop basis about 20% more than the average (see Figure 3). When comparing these prices to international benchmarks, with the notable exception of Taiwan, the blended price significantly exceeds the price of similar C-Band spectrum in other advanced economies, as can be seen in Figure 4. While the FCC is expected to auction additional mid-band spectrum (3.45-3.55GHz) by the end of the year, the spectrum will probably come with restrictions similar to the ones of the CBRS spectrum (3.55-3.65GHz) auctioned in 2020, making it less valuable to the mobile operators.
Figure 3: The blended auction price (red line) and the blended price paid by each bidder (incl. PSO) [Source: FCC, Aetha]
Figure 4: International benchmarks for C-Band spectrum auctions [Source: Aetha Spectrum Fee Database]
The results of Auction 107 confirm what many analysts expected before the auction – Verizon and AT&T acquired the lion’s share of the spectrum to get their hands on much-needed mid-band capacity. However, the price paid for this spectrum is high – which does not come as a surprise any more, given the FCC’s transparency about the auction. Over the coming week, we will follow up on this first overview with more in-depth analysis of the implications of this auction – keep an eye out for updates!
1 In addition to the final clock prices in the auction, winning bidders will pay the cost of relocation for existing satellite users. This is split into two components – the cost of accelerated relocation and the clearing cost. For spectrum in Product A, the total cost of accelerated relocation has been set at USD2.39 billion. For spectrum in Products BC and ABC, the total cost for accelerated relocation (i.e. by 2023) has been set at USD7.31 billion. In addition, the FCC estimates the clearing cost to be within the range of USD3.3 – 5.2 billion. For the purpose of our analysis, we use the mid-point of this range (USD4.25 billion) as an estimate of the additional cost to winning bidders.
2 Spectrum in the auction was split into three so-called products. Product A covers 100MHz from 3.7-3.8GHz, available from Dec 2021 through accelerated relocation. Product BC covers 180MHz from 3.8-3.98GHz, available from Dec 2023. Product ABC covers 280MHz, available from Dec 2023. PEAs either have Products A and BC available or Product ABC.