Kagan: Wireless Is Hungry For TV Spectrum

While it’s still uncertain how many broadcasters show up to sell TV spectrum in the FCC’s planned incentive auction next year, a new study from Kagan Media Appraisals forecasts that the broadband carriers will be out in force to buy it.

“[A]ll four of the existing national wireless operators — Verizon, AT&T, T-Mobile and Sprint — and very possibly other, non-declared contenders, are expected to be fully engaged and sufficiently capitalized bidders in the 2016 Broadcast Incentive Auction,” the study says.

The study cites four reasons:

• Mobile data traffic in the United Sates will grow seven-fold over the next five years. To meet this demand will require the full range of tools available to the wireless mobile industry players — more spectrum, exploiting technology innovations, partnerships, network sharing, layered and integrated networks.

• There is capital available. The capital markets are open to these companies. Verizon and AT&T are high-profile, investment-grade borrowers with multiple options for raising cash and monetizing assets. T-Mobile and Sprint have investment-grade parent companies with resources to support them at will. They both successfully accessed the public capital markets in 2014 and also have partnership and/or monetization options for raising cash.

• T-Mobile and Sprint need low-band spectrum to compete effectively over the long term. Sprint has just 14 MHz of low-band spectrum on average and T-Mobile has approximately 12 MHz of low-band spectrum across about two-thirds of the U.S. population, some of which still has interference issues. AT&T and Verizon have 45-55 MHz in most markets.

• Adding more spectrum is pivotal to Verizon and AT&T multi-pronged agendas. Both companies are pursuing new cross-platform business strategies and want to preserve their competitive leads in mobile, yet have tight ratios of available spectrum for the large customer bases they serve. Additional spectrum will improve network quality, help maintain competitive advantages and enable new business initiatives. The two major wireless broadband carriers — Verizon and AT&T — might welcome a delay in the auction since it would deny low-band TV spectrum to their smaller competitors, the study says.

But, the study adds, “given the current competitive conditions, the inevitable surge in mobile broadband usage and network load, plus the likelihood of new over-the-top and network-based competition, Verizon and AT&T will most assuredly defend their market lead and try to ensure its future by actively competing for whatever spectrum comes to auction in 2016.

“For them the spectrum has value on multiple levels. Not only do they need more spectrum, but whatever they win leaves that much less for T-Mobile, Sprint and any other new entrants or existing players.”

The study also estimates that the carriers will pay between $60 billion and $80 billion for the recovered TV spectrum. That range is based on the FCC selling between 84 MHz and 100 MHz of spectrum and represents a doubling of the prices set in the FCC Auction 73 in 2008, according to Sharon Armburst, the author of the study, who spoke to reporters during a teleconference this afternoon.

The study was commissioned by the Expanding Opportunities for Broadcasters Coalition, a group of broadcasters interested in selling their spectrum in the auction.