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Unprecedented FCC Change Helps Wireless Companies Obtain More Spectrum

Verizon, AT&T, Sprint, T-Mobile and even Dish are thought to be among the companies that are bidding on wireless spectrum that is being auctioned off by the Federal Communications Commission. These players are hoping to benefit from a first-of-its kind method being used by the FCC to allow wireless providers to bid for spectrum

These companies consider spectrum to be the life blood for the wireless industry because without it, they would not be able to meet the demands of customers who rely on wireless connections for everything from their smartphones to their tablets. This could spell disaster for these companies, which already face the challenge of operating in a highly competitive space.

Given the unprecedented move the FCC is making this year in auctioning off spectrum, investors should take solace in these companies having a better chance to secure the amount of spectrum they need to meet their customers’ demands.
 

 · Doling out the finite resource

 
The problem with spectrum is that there is a finite amount of it available. Some observers point to 2020 as the year when consumers will see their connections fail due to what has been named the “spectrum crunch.”

To get an idea of the magnitude of the demand for wireless connectivity in the U.S., consider this. It is thought that there are more connected devices than there are people living in the U.S. When you couple that with estimates that say 70% of Americans use smartphones, which are notorious for the amount of data they use, you can see why a shortage of spectrum can cause angst among providers.

This horrible, but very real, nightmare about a “spectrum crunch” is not loss upon wireless providers that already operate in a highly competitive space.

Nor is it loss upon the FCC, which is charged with keeping track of what companies are using spectrum. Back in 2010, it released its National Broadband Plan. In it, the FCC acknowledged that mobile broadband networks, devices and applications are critical components of the overall broadband landscape. Referring to spectrum as the nourishment for mobile broadband, the FCC began seeking new sources of spectrum to feed what it called the “rapidly accelerating demand for mobile broadband services.”

It zeroed in on broadcast television bands, which have the technical characteristics that are well-suited for current and next generation mobile broadband services. Wireless carriers are chomping at the bits to be able to offer 5G.

Also attractive, according to the FCC, is that the TV bands, in their current use, have a substantially lower market value than similar spectrum that has been auctioned primarily for mobile broadband use.
 

 · Who benefits

 
The top wireless carriers are Verizon (NYSE: VZ), AT&T (NYSE: T), Sprint (NYSE: S) and T-Mobile (NASDAQ: TMUS). Then there is satellite-TV provider Dish (NYSE: DISH), which wants to enter the wireless space, too.

As mobile broadband providers, they only have a certain amount of spectrum allocated to them. That’s where the auctions come into play as the providers are trying to get as many blocks as possible to keep up the demand.
Dish chief executive Charlie Ergen added a wrinkle to spectrum war when he started bidding on spectrum, too. It’s no secret that Ergen has been eager to get into the wireless broadband space. Unlike the others mentioned above, however, it does not have a network, and has slow to build one out.

Ergen has said that he may consider splitting Dish in half, with one side being made up of its satellite-TV business. The other half could be made up of its spectrum, which could be sold or leased. He’s also said that the best long-term choice for Dish shareholders would entail being able to “compete with the big guys.”

 

 · In conclusion

 
This year’s auction, which began at the end of May, could set precedent as spectrum that has traditionally been used for broadcast television will be re-purposed for wireless mobile services. Consumers are driving up demand for wireless connectivity as they increasingly use gadgets, such as smartphones and tablets.





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