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How 5G might shape future spectrum demand

Though the broadcast incentive auction only recently ended, promising to free up 70 MHz of low-band spectrum for wireless use, the hunt for further spectrum opportunities is not over.

And while most of the industry has turned its attention to higher frequencies and millimeter wave bands, Clemson University Professor and former Federal Communications Commission Chief Economist Thomas Hazlett continues to argue that the 600 MHz spectrum currently held by broadcasters should be put to different use.

The completion of the broadcast incentive auction means that broadcasters' one opportunity to receive big money for their spectrum has passed, Hazlett said. Speaking during a presentation at the Hudson Institute, a conservative nonprofit think tank, the professor said the time has come for an alternative plan, one that would involve the government offering spectrum "overlay rights." These rights, according to Hazlett, would allow broadcasters to keep their current spectrum for as long as they want it. But, new licenses would also be auctioned off to wireless companies and other new entrants.

"The new licensees have the right to use all the unoccupied channels instantly and have a secondary right to the used TV channels," he said, explaining that the overlay license holders would have the right to negotiate with TV station owners, and offer for the direct purchase or sharing of spectrum. Such approach means the federal government would no longer be the middleman negotiating between spectrum buyers and sellers.

"The overlay right downloads all of this negotiation to the marketplace. Yes you are going to have some transaction costs and some hold ups but you don't have to wait 10 years to try to figure out how to do this through a centralized two-sided administered auction in Washington," he said.

Hazlett is hopeful this approach will be used to address the remaining 210 MHz held by broadcasters, especially as consumers continue to enjoy greater video choice as a result of cable, satellite and over-the-top options. "That I hope will be the next chapter," he said.

But other industry observers note that no one is clamoring for more broadcast spectrum to be auctioned or made available — especially after the results of the 600 MHz auction. All told, the incentive auction repurposed 84 MHz of broadcast spectrum, as compared to the 126 MHz clearing target the FCC had initially set. Excluding guard bands, this leaves 70 MHz of cleared spectrum for wireless operators. The auction brought in $19.8 billion in gross revenue, more than $10 billion of which will go to broadcasters.

PwC Strategy& Principal Dan Hays previously noted the overall proceeds and bidding volume in the auction fell "short of most expectations."

Verizon Communications Inc. did not purchase any spectrum in the auction. Verizon Senior Vice President of Network Infrastructure Planning Ed Chan explained at a May analyst meeting that because of the move toward next-generation 5G networks, there is a shift toward mid-band and also high-band spectrum.

High-band spectrum is especially appealing for operators moving toward 5G because of the wide bands that are available to offer faster speeds and lower latency.

As a result, while Verizon did not purchase any 600 MHz spectrum during the FCC auction, it did enter into a thinly veiled bidding war with AT&T Inc. over Straight Path and the latter company's portfolio of more than 700 spectrum licenses in the 39 GHz spectrum band across the country. Verizon eventually agreed to pay $3.1 billion, up significantly from the $95.63-per-share all-stock offer AT&T initially made, which had reflected an enterprise value of roughly $1.6 billion for Straight Path.

And while AT&T spent $910.2 million during the 600 MHz auction, the telco also paid an undisclosed amount to acquire FiberTower Corp., a holder of 24 GHz and 39 GHz licenses. "The FiberTower deal gives us millimeter wave spectrum, 400 MHz of depth nationwide, and so we've got really good runway to deploy 5G and have capacity to accommodate that for the next few years," AT&T CEO Randall Stephenson said at a May industry conference.