The last time the FCC conducted a large-scale auction to sell its airwaves to mobile broadband providers, the iPhone was only a year old. Smartphone adoption has taken off in the six years since, but that has made the demand from companies like AT&T, Verizon, Dish, and America Movil this time around no less surprising. Bids reportedly total a collective $34 billion, three times higher than pre-sale estimates.
Part of the reason why the market price is so intriguing is that the segments of broadband spectrum being sold, (1695-1710 MHz, 1755-1780 MHz, and 2155-2180 MHz), are in the high frequency range. High frequency sound waves have a relatively difficult time making their way through buildings, and thus are less desirable to mobile phone providers than the low frequency airwaves that went on sale in 2008. Still, it is a deficiency that has done little to restrain the major telecoms: at over $34 billion, the auction will nearly double 2008’s $18.9 billion sale. Bids for a twenty-MHz block spanning parts of New York and Long Island, meanwhile, have reportedly reached nearly $2 billion.
The sale, otherwise known as Auction 97, is part of the federal government’s effort to unload currently unused telecom assets. The auction has lasted over twenty-eight rounds (and counting), with bids coming from over seventy interested parties. Surprisingly, the biggest mover so far has been Dish Networks, as the Englewood, Colo.-based company has reportedly bought up $10 billion in mobile broadband spectrum. But there is only a remote possibility that Dish is interested in building its own mobile network. Instead, it is likely a strategic investment to complement Dish’s existing broadband spectrum holdings. With spectrum-related assets that could be worth as much as $25 billion before it is all said and done, the investment would certainly be significant, if not savvy.
The market demand on display at Auction 97 is just the latest reason to be bullish on the future of mobile. Benedict Evans of Andreessen Horowitz estimates that by 2020, 80% of the world’s adult population will have a smartphone, while 1 billion new Internet users will experience it for the first time through a mobile device. In the United States, where smartphone penetration among adults is over 70%, the opportunity is in providing this mobile data faster: getting access to government-grade mobile broadband is a sure but increasingly expensive way of doing just that.