Mindel on 700 MHz and 1700-2100 MHz Auctions

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U.S. Spectrum Update:700 MHz Band and

Advanced Wireless Services (AWS)

Presentation by Mindel De La TorrePresident

Telecommunications Management Group, Inc.Spectrum 20/20 Rendez-Vous 2008

May 6, 2008, Ottawa, Canada

2May 6, 2008 U.S. Spectrum Update

Overview of Topics Covered

700 MHz Activities in the U.S.- 700 MHz Transition- Auction- Winners/Losers- Next Steps

AWS 1.7/2.1 GHz Auction in the U.S.


700 MHz TransitionDigital Television (DTV) Transition: Analog transmissions could not accommodate improved

video and audio quality so FCC adopted the DTV standard in 1996 after almost 10 years

Developments in mobile telephony also required more bandwidth in spectrum bands with excellent propagation characteristics -- like the 700 MHz band

In 2000 and 2001, the FCC adopted flexible wireless licensing rules for advanced mobile services

- Both the upper 700 MHz band in channels 60-69 (746-794 MHz) and the lower 700 MHz band in channels 52-69 (698-806 MHz) would be auctioned for fixed/mobile services


700 MHz Transition

DTV Transition & Public Safety Act of 2005 Set a firm deadline of February 17, 2009,

for broadcasters to vacate channels 52-69 and to operate digitally on channels 2-51 in the 500-600 MHz bands

Required the FCC to begin auctioning the licenses recovered from analog TV broadcasting by January 28, 2008


Transition Requirements Broadcasters must provide:

on-air info to viewers on the transition to DTV quarterly reports to the FCC on their efforts to

educate viewers Multichannel Video Programming Distributor

(MVPD) such as cable or satellite television operators must provide monthly notices about the DTV transition in customer billing statements

Manufacturers of television receivers and related devices must provide notice to consumers of the transitions impact on that equipment


Converter Box Program The Department of Commerces National

Telecommunications and Information Administration (NTIA) has launched a TV Converter Box Program

Converter boxes are necessary for consumers who wish to continue to receive over-the-air broadcast programming using analog only TV sets after February 17, 2009

As of January 1, 2008, all U.S. households are eligible to request up to two coupons, worth $40 each, to be used toward the purchase of up to two digital-to-analog converter boxes


700 MHz Auction: Upper Band Timeline

August 2006: FCC sought comments on what rules should govern wireless licensing in the upper 700 MHz auction, including provisions for a national public safety network

April 2007: FCC issued a Report and Order seeking further comment

July 2007: FCC issued its 2nd Report and Order identifying the auction rules, including anonymous bidding, open access, public-private partnership for the D block and reserve prices


FCC Auction Procedural Rules

Anonymous bidding was meant to reduce anticompetitive behavior and prevent collusion

Reserve prices were to ensure that the public recovers a minimum price for the spectrums resource value

Multi-round bidding where bidding on all licenses was conducted on each business day until bidding stopped on all licenses


FCC Auction Open Access Rules

FCC placed Open Access rules on the C Block. Bids had to exceed US$ 4.6 billion to trigger the rules, which require:

Open devices so consumers can use a handset with any wireless network operator

Open applications so consumers can download and use any software applications, content, or services they desire

On Jan. 31, the reserve bid price on the C Block was reached, triggering the open access provision


Available Licenses

The licenses available for auction are separated into five blocks as follows: A Block: 12 MHz (698-704, 728-734 MHz) B Block: 12 MHz (704-710, 734-740 MHz) C Block: 22 MHz (746-757, 776-787 Mhz) D Block: 10 MHz (758-763, 788-793 MHz) E Block: 6 MHz (722-728 MHz)


The 700 MHz Band Plan

EDCBA

Block

6

10

22

12

12

Bandwidth in MHz

722-728

758-763/788-793

746-757/776-787

704-710/734-740

698-704/728-734

Frequency Bands in MHz

176 EA

1 National

12 REAG

734 CMA

176 EA

License Areas Offered

903,690

1,330,000

4,637,854

1,374,426

1,807,380

Reserve Price in 000s (USD)

Light grey blocks were all auctioned in 2005 by Auctions 33, 38, 49, & 60 Colored blocks were up for most recent bidding in Auction 73 Dark grey blocks are public safety spectrum tied to D Block for public-private partnership


Panorama of Licenses

60 MHz available in the upper band (746-806 MHz) for commercial use in various license sizes including:- Economic Areas (EA)

176 geographic licensing areas- Cellular Market Areas (CMA)

734 geographic licensing areas- Regional Economic Area Groupings (REAG)

12 geographic licensing areas


Regional Economic Area Groupings (REAGs) 12 licenses


Economic Areas (EAs) 176 licenses


Cellular Market Areas(CMAs) includes Metropolitan Statistical and

Rural Service Areas 734 licenses


700 MHz Auction: Important Dates

January 24, 2008: Auction commenced, lasting for almost two months and over 200 bidding rounds

January 31, 2008: The reserve bid price on the C Block was reached, triggering the open access provision

March 18, 2008: Auction completed March 20, 2008: Winners announced April 3, 2008: Anti-collusion rules lifted, down payments

due and paid April 17, 2008: Final full payments paid February 17, 2009: Broadcasters in the upper 700

MHz must vacate and complete the DTV transition


Auction Results After 261 rounds, auction ended on March 18,

2008

The auction nearly doubled FCCs expectations, totaling ~US$ 19.6 billion

The D Block, which was meant to be a nationwide footprint for a public-private network to be shared with first-responders, only drew one bid of US$ 472 million, far below the US$1.3 billion reserve price so must be re-auctioned


Winners

711 million

4.75 billion

6.64 billion

No single main winner

Bids from Main Winners of the Block (US$)

1761.27 billionEchostar won most of E Block

E

124.75 billionVerizon won most of C BlockC

7289.14 billionAT&T won most of B BlockB

1743.96 billion31 winners, including Cox Cable, Verizon, & Qualcomm

A

Number of Licenses Won

Total Bids from All Winners (US$)

Main Winners of the BlockBlock

101 bidders won 1,090 licenses Verizon (US$ 9.4 billion) and AT&T (US$ 6.6 billion)

accounted for ~80% of the total revenue (70% of spectrum)


Bidder Valuation

Price per MHz per population $/MHz/POP is the most common indicator of bidder

valuation Calculated by dividing the bid amount for a band by

both the size of its bandwidth and the number of people living in its geographic area

Auction 73 averaged $1.28/MHz/POP Previous FCC auctions have averaged

between $0.28/MHz/POP to $4.18/MHz/POP


700 MHz Auction:Price/MHz/POP

0.740.762.651.13$/MHz/POPECBABlock

License Value Averages

6.17AT&TMilwaukee, WI6.51AT&TWisconsin 5-Pierce7.32VerizonOklahoma City, OK7.79AT&TSeattle-Everett, WA9.19VerizonChicago, IL$/MHz/POPWinnerLicense Area

Top Five Licenses by Value


Verizon & AT&T $/MHz/POP Verizon paid an average price of

$1.10/MHz/POP C Block was $0.76/MHz/POP Bid on B Block in Chicago was $9.19/MHz/

POP, the most costly spectrum of the auction

AT&T paid an average price of $3.15/MHz/POP Won 16 of 20 highest priced licenses on a

$/MHz/POP basis


A Closer Look at the Winners Satellite TV Company EchoStar bid $711 million

on 168 licenses in the E block Qualcomm bid $558 million for five E-block

licenses in the New York, Boston, Philadelphia, Los Angeles, and San Francisco markets, and was also the sole bidder on the D block

Sprint Nextel and T-Mobile did not participate Of the 12 C block licenses auctioned, Verizon

won 10 licenses bolstering their nationwide footprint. The other 2 licenses covering Puerto Rico and Alaska were won by a venture capital firm, Triad 700


Verizon: Big Winner and Challenges Ahead

In addition to C Block licenses, Verizon was the largest winner of licenses in the A Block which are midsized licenses, as well as 77 licenses in the B Block, the smallest regional licenses that were being auctioned

Verizon has to agree to the open access requirement for the C block accepting any legitimate device or software operating over its network -- FCC has yet to develop regulations for the open-access requirement

Also unclear is whether Verizon alone will evaluate equipment and applications for use over the network or whether evaluation should be conducted by an outside entity


Next Steps D Block

Congress held a hearing to examine next steps for the D Block since it is viewed as critical to the development of a nationwide, interoperable public safety network

On May 14, the FCC is expected to issue a Second Further Notice of Proposed Rulemaking that will consider how to address the public safety issues and the D Block

Relevant as Industry Canada considers Proposed Revisions to the Frequency Plan for Public Safety in the Band 700 MHz (Notice No. SMSE-004-08)

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Advanced Wireless Services (AWS)


AWS Auction Aside from the 700 MHz auction, the other big ticket

auction in the U.S. was for Advanced Wireless Services (AWS) in the 1.7/2.1 GHz band

The U.S. AWS band plan is somewhat harmonized with European band plans

- The downlink spectrum coincides with the downlink spectrum used for European 3G operations (2110-2170 MHz)

- The AWS uplink spectrum coincides with uplink spectrum for European 1800 MHz operations, primarily used for GSM services to date (1710-1788 MHz)


Band Clearing Process

NTIA and Department of Defense determined significant relocation of U.S. Government users was possible in 1710-1755 MHz band to frequencies above 4 GHz Industry stressed DoD would need to vacate entire

band eventually DoD granted access to 2025-2110 MHz on a co-equal

primary basis In 1992, FCC developed relocation plans for commercial

users in the entire 2110-2170 MHz band Relocation costs defrayed by AWS auction revenues


Band Clearing Process

Why was the band clearing/reallocation process successful? Had support of leaders in all organizations involved

and this was conveyed to all personnel working the issue

Methodology used to conduct studies and analyses were agreed by all parties

Numerous interactions meetings, working sessions

Direct involvement of private sector interested parties before final decisions made public

All parties got something out of the effort


AWS Auction1122 licenses offered covering the entire U.S.: Block A: 1710-1720/2110-2120 (20 MHz)

734 CMA licenses Block B: 1720-1730 / 2120-2130 (20 MHz)

176 EAG licenses Block C: 1730-1735 / 2130-2135 (10 MHz)

176 EAG licenses Block D: 1735-1740 / 2135-2140 (10 MHz)

12 REAG licenses Block E: 1740-1745 / 2140-2145 (10 MHz)

12 REAG licenses Block F: 1745-1755 / 2145-2155 (20 MHz)

l2 REAG licenses


FCC AWS Auction Results Action duration: August 9September 18, 2006

161 rounds 104 bidders won 1,087 licenses were issued

35 licenses without winner bidders

Total revenue: $13.9 billion (Net revenue: $13.7 billion)

Average Price per MHz per POP: $0.53/MHz/POP Top 14 bidders: Represent 99% of total dollars

spent at the auction, each spent over $20 million on licenses


AWS Auction Top Bidders

117,802,83999Cricket Licensee paid $700 million

198,768,19848Cingular AWS, LLC paid $1.3 billion144,544,4028

Metro PCS AWS, LLC paid $1.4 billion

267,387,437137Spectrum Co LLC (Comcast and Time Warner) paid $2.4 billion

192,047,61113Cellco Partnership d/b/a Verizon Wireless paid $2.8 billion

474,718,308120T-Mobile License LLC - paid $4.2 billion

Population CoveredWinning BidsBidder

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Thank you!

Mindel De La TorrePresident

Telecommunications Management Group, Inc.1600 Wilson Boulevard, Suite 710

Arlington, VA 22209 USAPhone: +1.703.224.1501

Fax: [email protected]

Mindel on 700 MHz and 1700-2100 MHz Auctions

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Transcript of Mindel on 700 MHz and 1700-2100 MHz Auctions