For 5G, AT&T and T-Mobile buy $1.8 billion worth of 24GHz spectrum across US
AT&T and T-Mobile committed to spend nearly $1.8 billion, combined, on high-frequency spectrum for their 5G networks in a Federal Communications Commission auction that sold airwave licenses covering the whole US. Verizon committed to spend $506 million in a separate 5G auction.
AT&T’s winning bids in the 24GHz auction totaled $982.5 million for 831 licenses in 383 Partial Economic Areas (PEAs). That should cover most of the US, as the FCC divides the country into 416 PEAs for purposes of the auction. This spectrum will be used for AT&T’s real 5G network, not the 4G network that AT&T misleadingly calls “5G E.”
T-Mobile’s winning bids totaled $803.2 million for 1,346 licenses in 400 PEAs.
The FCC revealed the list of winning bidders Monday. In all, the 24GHz auction included 2,909 licenses in 416 Partial Economic Areas. Each license includes 100MHz of spectrum in the 24GHz band. With some small exceptions, there were seven 100MHz blocks available in each of the 416 areas auctioned.
US Cellular will also spend $126.6 million for 282 licenses in 102 areas that it won in the 24GHz auction. Starry—a wireless home Internet provider—won 104 licenses in 51 areas for $48.5 million. Windstream was the next highest bidder, spending $20.4 million for 116 licenses in 40 markets.
The FCC completed the 24GHz auction despite warnings from NASA, NOAA, and the US Navy that using this specific frequency will harm weather forecasts.
“That’s because water vapor emits a faint signal in the atmosphere at a frequency (23.8GHz) that is extremely close to the one sold for next-generation 5G wireless communications (24GHz),” Wired noted. Meteorologists are concerned that 5G signals in the adjacent spectrum block will make it harder to spot evidence of water vapor.
Verizon tops other 5G auction
The 24GHz auction finished on May 28. The FCC on Monday also released the list of winning bidders in a 28GHz auction that finished in January. FCC procedures dictated that the full January auction results couldn’t be released until after the second auction finished.
Verizon topped all bidders in the 28GHz auction, with its winning bids totaling $505.7 million for 1,066 licenses in more than half of the geographic areas where licenses were auctioned. The 28GHz auction licenses were spread across 1,536 markets that were roughly county-sized, with each market getting two licenses consisting of 425MHz each in the 28GHz band. Verizon’s 1,066 licenses cover 863 of the 1,536 markets.
US Cellular committed to pay $129.4 million for 408 licenses in 362 markets. T-Mobile also participated in the 28GHz auction, spending $39.3 million on 865 licenses in 864 areas. Based on the prices paid per license, it seems that T-Mobile’s new 28GHz licenses will be in less financially lucrative areas.
Verizon already had significant 28GHz holdings before the auction. “The leading cellphone carrier by subscribers was expected to focus on [the 28GHz] auction to fill in gaps in the more than $3 billion worth of licenses it had already bought through private purchases,” The Wall Street Journal wrote.
Big spectrum blocks…
The 100MHz- and 425MHz-sized licenses contain a lot more spectrum than licenses sold in previous auctions focused on 4G. For example, an FCC auction in 2016 and 2017 included a total of 70MHz for licensed use inside the 600MHz band, and the FCC auctioned that off in blocks of 10MHz each. The 4G LTE specification supports blocks of up to 20MHz each.
5G will work on the lower-band spectrum carriers use for 4G. But the 5G hype mostly centers on the use of high-frequency bands, which can produce faster speeds simply because there’s more unused spectrum in the higher bands.
… but shorter signal ranges
The sheer amount of spectrum available in higher frequencies comes with a major tradeoff—the signals don’t travel as far and are easily blocked by walls and other obstacles. That’s why carriers sought sub-1GHz spectrum to cover the entire US with 4G networks.
T-Mobile Chief Technology Officer Neville Ray recently warned that 5G networks using the higher millimeter-wave frequencies “will never materially scale beyond small pockets of 5G hotspots in dense urban environments.”
After Verizon’s early launch of 5G in Chicago, reviewers testing the network found speeds of more than 600Mbps in some areas but had trouble even finding signals when they weren’t near a tower. Verizon’s Chicago 5G service uses spectrum in the 28GHz range.
Despite T-Mobile acknowledging that high-frequency networks won’t offer widespread coverage, the carrier says it will deploy 5G nationwide using a mix of low-, mid-, and high-band frequencies. T-Mobile is also seeking government approval to buy Sprint, the fourth-largest carrier, which sat out the recent 24GHz and 28GHz auctions.
Sprint launched 5G in four cities on 2.5GHz spectrum that it already uses for 4G. The Verge tested Sprint’s 5G network in Dallas and found speeds ranging from under 100Mbps to more than 600Mbps, with wider signal range than Verizon’s early 5G deployment.
Talking to investors, Ray said that T-Mobile “believe[s] in millimeter-wave [spectrum]” for dense urban environments but that “the software is not mature” yet, according to a Seeking Alpha transcript. He reiterated that millimeter-wave spectrum “doesn’t penetrate walls [and] windows very well” and that it won’t work well when you’re “more than 500, 600 feet away from a small cell.”
“It’s way, way more economic to deploy mid-band 5G spectrum on the existing cell grid than it is to try and deploy literally hundreds and hundreds of thousands of millimeter-wave small cells to give you some form of contiguous coverage and experience,” Ray said.
Verizon CEO Hans Vestburg addressed millimeter-wave concerns in a call with investors, saying that it “has lived up to our expectation on performance” but is “not a coverage spectrum.”
Hype “misaligned with economic reality”
While the top three carriers seemingly have enough high-band spectrum to cover most of the country, that doesn’t necessarily mean they’ll install enough small cells to make it useful everywhere. Even 4G coverage isn’t truly nationwide from top carriers, with many people getting slow speeds and rural carriers trying to fill in the gaps.
One prominent telecom industry analyst is skeptical of carriers’ large investments in 5G networks. “The hype is so preposterously misaligned with economic reality that inevitably there’s going to be this disastrous crash in expectations and people are going to call it a failure,” Craig Moffett, founding partner at MoffettNathanson Research, told Axios.
While Moffett called 5G “an impressive next step for the network,” he also said that “there isn’t actually a revenue use case for 5G yet,” making it hard to justify a giant investment to shareholders.
Verizon was going to charge $10 extra a month to access 5G but later waived the charge. AT&T CEO Randall Stephenson recently said that 5G will likely be priced similarly to wireline Internet, with customers paying more for faster speeds. But he said it will take “two or three years” for that to happen.