CCA Members Expect Small Carriers to Bid in Incentive Auction, but no Guarantees
FORT LAUDERDALE -- The extent of small carrier bidding in the TV incentive auction remains an open question, with the bidding to start March 29, industry officials said at the Competitive Carriers Association annual meeting, which closed Friday. The FCC plans to set aside 30 MHz of “reserve” spectrum in many markets for companies without significant low-band spectrum holdings in that market.
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Small carrier executives at the conference said operators will decide whether to bid in the auction based on their own individual business plans. Sprint, with T-Mobile one of the two large members of CCA, has already indicated it won’t bid in the auction (see 1509280059). Executives at the 2014 annual convention predicted more small carriers would bid in the incentive auction than in the then-pending AWS-3 auction (see 1409120036).
Carriers will have to weigh the low-band spectrum they already own, whether at 700 or 850 MHz, and whether they're in a market where AT&T or Verizon is eligible to bid for reserve spectrum, said executives at the conference. They will also have to take into account FCC rules that could make reselling the licenses more difficult than in the past. CCA said in a July FCC filing, AT&T or Verizon are eligible to buy reserve spectrum in markets that cover 74 percent of the nation and 40 percent of POPs.
Some carriers view the 600 MHz spectrum as offering them long-term security and enough spectrum to deploy LTE, said CCA President Steve Berry in an interview. “What I am hearing is a lot of our carriers have gone to their boards, they’ve gone to their private equity firms, they’re getting their ducks in a row,” Berry said. “They’re lining up funding sources. They’re in this auction for keeps. They need this 600” MHz spectrum.
A common refrain is that small carriers have plenty of excess spectrum, said Jim Lienau, chief technical officer at Cellcom, a carrier in Wisconsin. But mostly they have PCS and other mid- and high-band spectrum, he said. “I always hear that,” Lienau said. “But I think that’s the wrong spectrum for the rural carriers. What the small carriers need is the low-band spectrum and that’s what 600 MHz is all about.” Low-band spectrum can cover more areas with fewer cell sites and is less expensive to deploy, he said. “It’s going to be a challenge, but I think it’s going to be important for small carriers to get as much as they can,” Lienau said.
One executive at a small operator said his company is looking at two licenses on which it could potentially bid. But one license covers a more urban area and is likely to be expensive and Verizon and AT&T are reserve eligible in the second market. No one knows for sure at this point how many small carriers will play in the incentive auction because each faces different circumstances, the executive said.
A second small carrier executive said his company was evaluating whether to bid, and the service territory it serves is remote so the licenses may be relatively inexpensive. But the auction raises many complicated questions, the executive said.
“It’s a tricky situation for smaller, nonpublic wireless companies,” said Paul Gallant, analyst at Guggenheim Partners. “I think the FCC really tried to support the interests of regionals through the reserve and smaller licensing areas,” he said. “But the other side of the ledger is incentivizing broadcasters to show up. It’s not perfect for small players, but it’s much better than where it could have gone.”
James Barker of Latham & Watkins said, based on carrier activity alone, it does seem like bidding will be robust in the auction. The FCC has done a lot of outreach to broadcasters and has tried to accommodate carrier concerns, Barker said.
U.S. Cellular is still evaluating its auction plans, said Grant Spellmeyer, vice president-federal affairs. “I do think you’ll see a lot of players show up and participate,” he said. But concerns remain about information transparency leading up to the auction and the FCC does have to find a way to conduct multiple auction practice sessions, he said.
The FCC has made most of the hard policy calls, said Jeffrey Marks, senior counsel at Alcatel-Lucent. “You have before you what’s going to happen, but now you have to deal with it and it’s not going to be that easy,” Marks said.
Predicting the level of small carrier bidding in the auction is difficult, said Roger Entner, analyst at Recon Analytics. “Based on my conversations, the larger small carriers will participate,” he said. “The really small carriers don't see a particular need as there is already a surplus of spectrum in the rural markets that they serve.”