- New Street Research analysts figure 500 MHz+ of spectrum could end up in U.S. carriers’ hands over the next four years
- They estimate the value of these bands at $160 billion based on prior transactions
- That sounds like a lot of cabbage, but it’s possible that figure is conservative
If everything goes their way, U.S. wireless carriers could see somewhere in the neighborhood of 500 MHz of spectrum flowing into the spectrum pipeline over the next four years. Based on previous transactions, that spectrum could be worth a cool $160 billion.
That’s according to the analysts at New Street Research (NSR), who this week published a report spelling out exactly where this licensed spectrum would come from and how much carriers might be willing to pony up in order to acquire it.
The operative words here are “if everything goes their way.” That’s because the wireless carriers aren’t the only ones champing at the bit for spectrum. The government’s spectrum requirements are growing alongside the needs of commercial wireless services, and advocates for unlicensed spectrum, like that used for Wi-Fi, always want more spectrum.
But some of the spectrum bands under consideration for terrestrial wireless are more contentious than others. For example, while wireless carriers would love to get their hands on the lower 3 GHz, it’s currently being used by the Department of Defense (DoD) for critical radar and defense systems. The DoD isn’t exactly in a hurry to vacate this spectrum.
And let’s not forget about Elon Musk’s SpaceX, which is pressing the FCC to make the upper C-band available for satellite sharing. That could turn into a bitter fight for the wireless carriers. We don’t know. Does Elon get what Elon wants? (More on that in a minute.)
'No guarantee'
While identifying potential sources of spectrum for the wireless carriers in the next few years, NSR analyst Jonathan Chaplin is realistic.
“The carriers are well positioned to win these fights, but there’s no guarantee that they do,” he said during a call with investors.
It’s worth noting that the U.S. wireless carriers are still deploying new 5G gear in C-band, 3.45 GHz and 2.5 GHz spectrum. They’re not talking about adding new spectrum right this minute. But the carriers are always clamoring for more spectrum, and they need to get it into the “pipeline” because it typically takes years between the time spectrum is identified to the time it’s actually available. Some of the bands require that existing users be cleared or relocated, adding more time to the equation.
First up: AWS-3 auction
One of the bands that is relatively easy to identify for the near term is the AWS-3 spectrum. The FCC is obligated to initiate an auction of the AWS-3 band by June 23, 2026, and one of the first steps toward that goal is on the FCC’s agenda this week.
Also on the FCC’s Thursday agenda is the aforementioned upper C-band, which could make 220 MHz available once SES and Intelsat close their merger and relinquish some of their spectrum.
The FCC tomorrow will consider opening a Notice of Inquiry (NOI) on the upper C-band, which kicks off a process where the FCC collects comments on a bunch of questions, including the best way to use the spectrum. Will it be best allocated for 5G? Should the commission consider the allocation of this band for another service? The NOI will explore those types of issues.
This is where it could get dicey if SpaceX/Starlink insists on lobbying for shared satellite usage in the band.
Ultimately, New Street’s policy analyst Blair Levin is giving the edge to the wireless carriers, pointing out that a wireless auction produces money for the government, something Congress and the President likely favor. Plus, multiple compromises are available, such as allocating of the upper C-band to exclusive use by the carriers and some to satellite sharing.
On the other hand, referring to an old Broadway song, “in this Administration it appears that ‘whatever Elon wants, Elon gets.’ So, it is difficult to have conviction on the outcome,” Levin said in a recent report. His bottom line: “Wireless has not won anything yet. We will revisit the issue once we see the NOI and the responses.”
Source of the cash
The other big question is how much capital the Big 3 carriers will have at their disposal over the next few years.
By NSR’s estimates, AT&T, Verizon and T-Mobile can comfortably invest $177 billion while still meeting their share repurchase commitments. But they could also go much higher than that, depending on myriad factors.
If that sounds nuts, consider this: For their latest projections, NSR analysts used the same balance sheet framework to estimate spending that they used in the first C-band auction, and their estimates proved too low for that auction, which garnered a whopping $80 billion.
NSR’s estimates were “miles above all other estimates at the start of the auction,” according to the report. “The carriers were willing to stretch balance sheets further than we expected.”
If they do that again and AT&T and T-Mobile halt repurchases, the balance sheet capacity across the three could swell to $227 billion.
That sounds like as good a motive as any for the U.S. government to give the carriers what they want. We’ll see if it’s enough.