As part of the The Middle Class Tax Relief and Job Creation Act of 2012, the FCC is mandated to auction several blocks of spectrum over the next few years in order to spur growth in the wireless industry and relieve the spectrum crunch. Because of this, it has been working to identify and release spectrum licenses for auction. As of late, the FCC has been working on the AWS-2, AWS-3, 600MHz, and 3.5GHz bands. The completion of the AWS-2 rules is a small step forward to completing its obligations under the 2012 law.
The AWS-2 band, unlike all other bands that the FCC is working on, has no current government users. That means that the band is ready for immediate auction once the rules have been worked out and the auction structure has been set up.
Because of the placement of AWS-2 (1915-1920 MHz for uplink and 1995-2000 MHz for downlink) along other bands, it is also referred to as the PCS H block, despite being classified under Part 27 (AWS) instead of Part 24 (PCS) rules. Normally, Part 27 rules are quite lax compared to Part 22 (Cellular 850) and Part 24 (PCS), but the potential for interference with PCS and AWS-4 forced the FCC to impose stricter interference prevention requirements. Some of the interference prevention requirements are:
More stringent out-of-band emission limits to prevent RF spillover to adjacent frequency bands on 1995-2000 MHz:43 + 10 log(PTX) dB normally (PTX represents power in watts for transmitter)70 + 10 log(PTX) dB when transmitting into AWS-4Limit to 25 dBm (300 mW) EIRP (effective isotropically radiated power, which is power emitted evenly throughout an antenna) across the entire block to prevent overload on adjacent PCS operations.Notification of deployment of service on PCS H block to PCS A block licensees:This was specifically needed because 2G GSM on PCS A block did not fare too well with the overload caused by PCS H operations at 1915-1920 MHz, though CDMA 1X, UMTS, and LTE handled it better. T-Mobile US wanted it to ensure it can adequately protect its GSM service from interference, since GSM operations may not be well-protected by the interference prevention requirements.The notification must be issued when the PCS H licensee is ready to sell service to customers, and not necessarily any earlier (definitely not any later).Reliably useful coverage and service must be provided to 40% of the population of each license area within 4 yearsReliably useful coverage and service must then be extended to 75% of the population of each license area within 10 yearsIf a licensee fails to meet the former, the term for the latter is reduced by 2 yearsIf a licensee fails to meet the latter, then the license will be automatically terminated in each area the licensee failed to meet the coverage requirementsRadio frequency/spectrum block allocations in the USA.
These requirements are slightly stricter than the AWS-4 requirements, but the FCC expects the licenses to be quickly utilized for mobile broadband service. The FCC is also not permitting automatic renewal of the license after the 10-year license term is complete. Licensees must apply to the FCC and demonstrate that they have earned the renewal of their license to the spectrum. Licenses are divided up by Economic Areas, which are larger than traditional PCS Trading Areas and Cellular Market Areas, but smaller than Region licenses. The adjacent spectrum blocks (PCS G block and AWS-4) also use the same license divisions, making it very easy to combine them for larger spectral pipelines.
As for the auction, the FCC is following the same model it used for the AWS-1 auction in 2006: competitive bidding with credits for small businesses. The FCC will apply a 15% credit on the winning bid for licenses by companies whose gross revenues for the previous three years does not exceed $40 million. For those who make less than $15 million, the FCC will apply a 25% credit on their winning bids.
The FCC is trying very hard to make this auction attractive to a large number of players, but realistically only two companies will be willing to bid for this spectrum: Sprint and Dish. Sprint wants the spectrum so that it can extend its 5MHz LTE channel to 10MHz (which would double the total bandwidth and the number users that can be supported on the network) by slightly modifying Network Vision to add support for the extra spectrum. Dish wants the spectrum in order to be able to have a band that is more palatable for operators to partner with Dish in order to develop a wireless network on.
The AWS-4 spectrum has no ecosystem at all. No equipment has been developed, nor has Dish made any effort to get commitments from various infrastructure vendors and OEMs to produce equipment for the AWS-4 band. It is quite likely that Dish feels it would be easier to work through an expanded PCS band ecosystem rather than the fresh AWS-4 one. Whether this is a good approach or a misguided one is anyone’s guess, though.
In the end, this auction is not likely to result in any dramatic changes to the competitive landscape. The block of spectrum is small enough and specialized enough that only one or two companies can realistically bid and win licenses in. It is very likely that Sprint will acquire all the licenses, as it has plenty of incentive to do so.