Small Carriers Expected to Push FCC to Offer D-Block
The FCC is expected to face pressure from small and midsized carriers to open the D-block and sell it for commercial use rather than as a national public safety license, regulatory and industry sources tell us. Pressure is expected to be especially intense since C-block spectrum is selling at an average price of 76 cents per MHz per POP, compared to $2.66 for the B-block, sought in many cases by smaller carriers. Verizon Wireless is by all accounts the likely high bidder for the C-block and, sources say, small carriers are likely to complain that it’s getting the spectrum at a bargain price.
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The price for the B-block is high compared with other auction results. The average weighted price for advanced wireless services spectrum was 12 cents per MHz per POP in rural areas, 33 cents in large metro areas and 65 cents in the biggest cities, according to a report by Falkenberg Capital. In recent PCS spectrum auctions the average price was 30 cents in rural areas, compared with 65 cents in the biggest cities. The average price for the A-block, which also offers smaller licenses, is $1.14.
Small carriers would face an uphill fight, especially considering the pressure from Capitol Hill for a national public safety broadband network. Members of the House Commerce Committee raised the future of the D-block repeatedly Wednesday during a hearing on the DTV transition.
“I'm sure there’s going to be pressure because the small guys are saying we want cheap spectrum too,” said an industry source not active in the auction. “A small license area plan for the D block” would interest rural carriers because they “have developed their business plans around quality services in small license areas,” said an attorney who represents small carriers.
“I understand why they would want to press for this, particularly given the high prices on the B-block,” said Rebecca Arbogast, analyst with Stifel Nicolaus. “But if the government -- Hill and FCC -- maintain that they want to use the D block to provide for a nationwide, interoperable public safety broadband network, it’s tough to see how the small carriers will prevail in this pursuit.”
“I think the FCC will likely continue to examine all of its options for the D block and refrain from taking making any formal decisions until after the current bidding ends for all the blocks that have already met the reserve price,” said Jessica Zufolo, analyst with Medley Global Advisors. “At this point, it seems clear that the commission is focused on achieving its original goal of attracting a bidder willing and able to build a wireless broadband public safety network in the D block. With the auction now reaching close to $20 billion, the FCC has a bit more flexibility to devise new rules that would help them reach this goal.”
“I think the D-block could seem potentially interesting to a lot of people,” said a regulatory source not active in the auction. “More than just rural carriers, I think there could be a lot of interest among a lot of groups.” Several sources say Frontline Wireless, which decided not to bid in the auction, could reenter the fray if the FCC reduces the reserve price and buildout requirements for the D block.