CBRS PAL auction poised to emerge a doozy, possibly raising $10B

Even though the CBRS 3.5 GHz auction is part of a shared spectrum paradigm that some considered to be part of a grand experiment, it’s lining up to be a doozy, with 271 qualified applicants that could collectively bid anywhere from $4.4 billion to upwards of $10 billion based on analyst estimates.

The FCC released the list of qualified bidders on July 1, and it includes the usual suspects: Verizon, AT&T, T-Mobile, U.S. Cellular, Comcast and Dish Network; Dish is bidding under the name Wetterhorn Wireless.

But there’s a long list of not-so-usual suspects in this auction. Raymond James analysts noted that it’s the largest number of bidders since Auction 5, the original PCS C Band auction, in the mid-1990s that attracted 255 bidders. The PCS auctions kicked off a Wild West of sorts in wireless, creating myriad licensees and service providers across the country until consolidation whittled the number down to the current handful of nationals and remaining regional service providers.

Because the CBRS auction, dubbed Auction 105, includes 22,631 licenses and they’re the size of counties, a lot more entities are eligible and interested in bidding than auctions in the intervening years. Utilities, rural service providers and universities are in the mix along with traditional bidders. 

In terms of supply, Auction 105 offers a total of 70 MHz of available spectrum compared to the C-band Auction 107, which will offer 280 MHz when that gets underway on December 8. 

Even though supply will be relatively low in the CBRS auction, demand could be quite high, given the 271 qualified bidders versus 23 to 70 bidders in the previous five auctions, noted Raymond James analyst Ric Prentiss.

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In fact, the vast majority of bidders in Auction 105 are small and have applied for rural (75 bidders), small business (7 bidders) or very small business (129 bidders) bidding credits, according to Raymond James. The other 60 bidders include the aforementioned usual suspects, as well as 11 public energy companies.

Some familiar names on the qualified bidding list include Chevron, Bluegrass Consortium, Cincinnati Bell, Cox Communications, Deere & Company, Duke University and Health System, Frontier Communications, Hawaiian Electric Company, Inland Cellular, Midcontinent Communications, Puerto Rico Telephone Company, San Diego Electric Gas and Electric Company, Shenandoah Cable Television and Windstream Services.

The applicants that did not qualify include Corning, Dallas Independent School District, Mile High Networks, the University of Kentucky and Montana Internet Association, to name a few.

Some industry analysts have predicted the CBRS auction gross proceeds will amount to $4.4 billion at $0.20 per MHz-POP. But Raymond James' estimate is significantly higher.

“With such a diverse group of qualified bidders and limited supply, it is hard to gauge potential pricing, but we would expect gross proceeds for Auction 105 could be in the $8 - $10B range, with the C-band auction expected to produce dramatically higher bids,” Prentiss wrote.

CBRS spectrum is expected to greatly increase the number of private networks in the U.S. Expectations also are high for a healthy secondary market as PAL licensees seek to lease their spectrum to other entities.

Per the FCC’s rules, any frequencies designated for priority access that are not used by a PAL holder may be used by the General Authorized Access (GAA) users. Spectrum Access System (SAS) administrators like Federated Wireless expect a secondary market for PAL licenses will develop as PAL winners build out their networks and find areas where they have excess capacity.  

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The CBRS band started out as the “Innovation Band,” which still lives up to its namesake to various degrees. It’s not exactly the same as it was when the FCC created it under Tom Wheeler’s chairmanship.

When the Trump administration took over and Ajit Pai was appointed chairman of the FCC, he assigned a sort of “do-over” for the band to fellow Republican Commissioner Michael O’Rielly, who set out to make it a more 5G-friendly band as the rest of the world went gangbusters on mid-band spectrum for 5G. In the U.S., the 3.5 GHz band is the nearest-term opportunity for operators to acquire new mid-band spectrum for 5G, the next closest opportunity being the C-band.