Dish looks like the winner of a $1.5B spectrum auction, but its plans are unclear
The H Block auction sold potentially valuable frequencies for funds to build a national public safety network
By Stephen Lawson | Published: 00:39, 28 February 2014
The bidding has stopped in a US$1.56 billion auction of wireless spectrum licenses across the U.S., and satellite operator Dish Network appears to be the winner.
Dish pledged in advance to pay the $1.56 billion reserve price for the so-called H Block, and in the end the auction hit exactly that level. The participants were anonymous, but the final price and the fact that one bidder dominated the proceedings from the beginning show that Dish was the winner, analyst Tim Farrar of TMF Associates said. The auction rules call for the FCC to release the names of the winner or winners shortly after bidding closes.
The H Block is small by the standards of today's high-powered LTE networks in the U.S., consisting of just 5MHz for sending data downstream to mobile devices and 5MHz for users to send their own content and requests up to the network. Most service providers like to have at least twice that. However, the auctioned licenses are intended to reach effectively the entire U.S. population.
It was the first major FCC spectrum auction since 2008. The auction rules allow the H Block to be used for any land-based wireless service, either fixed or mobile. Winners will have to reach 40 percent of the people in their area within four years and 75 percent within 10 years.
The prices paid for the licenses varied based on the region and the number of potential users. The lowest bid was $10,000 for a license in American Samoa and the highest was almost $217 million for one covering a large area around New York City.
The spectrum could be very valuable to Dish or Sprint, both of which have other, larger blocks nearby, Farrar said. Combining it with those frequencies would open up various ways to take advantage of the spectrum.
But don't expect Dish to become a big new rival taking on the country's four major wireless operators. The company is unlikely to launch a mobile service by itself in today's U.S. mobile market. Sprint and T-Mobile USA are fighting tooth and nail as it is, in a market dominated by the much larger Verizon and AT&T. Instead, Dish is more likely to work with a partner.
The government is pushing the H Block into commercial mobile service as part of a larger effort to head off what the agency, and many in the industry, call an impending shortage of spectrum for mobile data traffic. Though some observers say the technology exists to share spectrum instead of auctioning it off to exclusive owners, the FCC pledged in 2009 to find an additional 500MHz of frequencies for commercial wireless within 10 years. Auctions also bring in revenue, and the proceeds from the H Block action are destined to help fund a nationwide wireless public safety network.
The H Block had been set aside for auction for nearly 10 years. Frequencies had to be cleared of other uses, including by Sprint, and long-running interference disputes followed. The auction winners will have to reimburse Sprint and others for clearing the spectrum.
Assuming Dish becomes the owner of the band, its most likely mobile partner is Sprint, Farrar said. Together, the two companies would have three blocks of spectrum near to each other. Dish's current mobile frequencies are in the AWS-4 (Advanced Wireless Services) block, and the company hasn't used them yet. Sprint controls the so-called G Block nearby.
Working together, the two companies could add the H Block and G Block to the Sprint mobile network and use two other blocks for a new type of service, Farrar said. That service would use the AWS-4 frequencies to connect to the Dish TV antennas on subscribers' homes, Farrar said. From there, radios on the users' roofs could deliver service nearby using spectrum that Sprint acquired with its purchase of Clearwire last year.
But a long history of bad blood between the companies could make a partnership hard, TMF's Farrar said. Dish tried to buy both Sprint and Clearwire last year while Sprint was trying to complete its $21.6 billion acquisition by Softbank, and the two companies have also feuded over interference rules for the H Block itself. It's likely that Sprint sat out this auction because it didn't want to get into another bidding war with Dish, Farrar said.
Dish said it was not allowed to comment on the auction at this time.