The broadcast incentive auction has been widely described as a “once-in-a-life-time opportunity” for wireless providers. So why did the chief executives of Verizon, Sprint, and Dish use their recent second quarter conference calls to talk down the possibility of bidding on the beach front property of wireless spectrum?
Verizon CFO Fran Shammo said his company doesn’t have a big need for low-band spectrum. Sprint CEO Marcelo Claure has his hands full. The company just lost it’s No. 3 rank to T-Mobile and it is in the early stages of trying to turnaround the company. Claure wants to study the rules, first. And Dish chairman, president and CEO Charlie Ergen is rethinking his ideas to compete with AT&T and Verizon following a decision by the Federal Communications Commission to revoke the discounts he expected out of the recent AWS-3 spectrum auction.
The way all three companies are talking, they might just walk away from the last chance to snap up so much coveted-low-band spectrum, ideally suited for wireless services.
AT&T and Verizon, the largest two carriers, combined already have more than 70 percent of the current low-band spectrum. Any company that wants to compete with the big two, needs solid national coverage and that means more low-band spectrum.
So the possibility that three major bidders might sit out the broadcast incentive auction is bad news for the success of the auction, planned for March 29, 2016. Without enough eager, deep-pocketed bidders, broadcasters could get spooked out of relinquishing spectrum and sit the auction out. That would undercut the Congressionally-mandate goal of transferring more spectrum to mobile services, and would diminish the anticipated revenue to the federal coffers.
The auction’s outcome is critical to Tom Wheeler’s legacy as FCC chairman. He’s been relentless in keeping the auction on track. Wheeler just passed, in a party-line vote, a controversial set of auction procedures he describes as a “good, balanced logical solution to an incredibly complex never-tried situation.” He has pushed back against the critics of the newly adopted procedures and shrugged off the possibility that there could be a shrinking number of bidders.
“It’s their call,” Wheeler said during a press conference Thursday. “It’s a once in a lifetime opportunity.”
T-Mobile CEO John Legere is practically giddy knowing he could face fewer competitors in the auction. He says his company will “play hard” to get more of the beachfront spectrum to add to its portfolio.
— John Legere (@JohnLegere) August 6, 2015
But commissioner Mike O’Rielly said he would be concerned if the number of wireless bidders drop off. “The [auction] is a balancing act. You have to entice broadcasters to participate attract spectrum bidders.”
It could be that Verizon, Sprint and Dish are all blowing smoke in a high stakes game of chicken to keep the spectrum prices low.
“It’s classic buyer posturing,” said Preston Padden, executive director of the Expanding Opportunities for Broadcasters Coalition of more than 80 would-be broadcast sellers. “They all need this spectrum. Verizon is going to launch an over-the-top mobile service. They will jump in with both feet. Plus, we’ll see some surprise bidders.”