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The pricey path to 5G

The pricey path to 5G
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On Dec. 8, the FCC will begin selling off another swath of wireless spectrum to accelerate the country’s march toward the full promise of 5G. In an auction projected to yield as much as $50 billion to the U.S. Government, 57 companies have qualified for the opportunity to bid on 5,684 spectrum licenses to serve 406 partial economic areas — or markets — throughout the United States.

The winning bidders will walk away with 15-year licenses to provide either terrestrial fixed or mobile applications, with the condition that they offer services to 45 percent of the population within eight years of obtaining the license.

The 280 MHz of C-band spectrum being released is highly coveted for its flexible use, especially by companies like AT&T, Verizon and T-Mobile, who are working feverishly to build out their 5G networks. That spectrum enables us to make calls from our mobile devices, follow our friends on Instagram, call an Uber, pull up directions to a destination, or do just about anything and everything on our mobile devices.

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5G gold in the airwaves

The competition for spectrum is a high-stakes game. Verizon has the largest U.S. portfolio of high-frequency spectrum licenses, after spending nearly $2 billion for licenses to serve densely populated areas. DISH bid $900 million for its recent spectrum licenses. Comcast Xfinity Mobile spent nearly $500 million for licenses, as did Charter Communications Spectrum Mobile, reflecting the cable industry’s entry into the wireless market, primarily as sellers of wireless service.

In the chronology of cellular service, 5G — or the “fifth generation” of wireless telecommunications services — is helping to deliver on “The Internet of Everything.” While 4G ushered in the app economy, 5G promises the Internet of Everything, everywhere for everyone.

Industry executives claim that 5G will historically transform industries across every sector of the economy, redefining work, elevating living standards, and profoundly impacting our global economic growth. The hope is that 5G will ultimately create a world of new economic opportunity, greater mobility, and smarter connectivity for individuals, businesses and society as a whole — all with greater speed.

True to form, 5G wireless technology is already changing the world as we know it. It is facilitating faster communications, unlimited interoperability and transforming everything from commerce, entertainment, family life and travel. In a COVID-19 world, 5G can be especially useful in empowering telehealth, tele-medicine and distance learning. It is enabling our shift from the workplace to home more seamlessly than expected and helping businesses and cities to become smarter.

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For many months now, Americans have been inundated with a barrage of commercials from AT&T, Verizon and T-Mobile — all claiming to have the best in 5G service. Today, there are over 100 cities across the country where 5G service is available in one form or another. Consumers crave it, and carriers cannot get it to market fast enough. While few of us actually know the full dimensions of 5G technology, or even how it works, we do know that it is a big thing. And like most big things, the stakes are quite high.

The top wireless companies, along with cable and satellite providers Charter, Comcast, Cox and DISH are investing billions of dollars in marketing, advertising and infrastructure to seize the lead in the fierce competition for 5G.

Why?

Because there’s gold in those 5G airwaves. The path to profit and preeminence depends almost entirely on how much spectrum the companies can garner from the U.S. government. But getting there will not be cheap. Americans want the latest, fastest, and coolest technology and telecom companies are spending to deliver it.

More spectrum needed

As the agency directly responsible for spectrum management, the FCC’s views on 5G are critical. FCC Commissioner Brendan Carr has emerged as one of the leading proponents of a more focused 5G policy. He recently noted, “You need to make more spectrum available to win the race, and right now we've made more spectrum available than any other country in the world.”

While spectrum is a finite resource, it can be repurposed. The U.S. government controls and manages how it is used by commercial entities and public purposes. It also has the capacity to reallocate certain bands of spectrum for new or high demand purposes, as it did reallocating broadcast spectrum for wireless spectrum in 2016.

According to outgoing Secretary of Commerce Wilbur RossWilbur Louis RossCommerce Department unit gathered intel on employees, census critics: report Former Trump officials find tough job market On The Money: Retail sales drop in latest sign of weakening economy | Fast-food workers strike for minimum wage | US officials raise concerns over Mexico's handling of energy permits MORE, advancing a 5G mobile broadband network is a priority for America. Ross said, “Whoever pursues it, whoever does it, we’re very much in support of 5G. We need it. We need it for defense purposes, we need it for commercial purposes.” Of course, Ross’s comments come amidst growing concern that the U.S. may lag behind China, the European Union, Japan and South Korea, which have made 5G technology a national priority.

Spectrum auctions bring big bucks

Recent auctions of spectrum have yielded impressive results. For example, over 14,000 spectrum licenses were awarded in March 2020, Auction 103, one of the series of major spectrum auctions. With bids totaling over $7.5 billion, 14,142 licenses were awarded to 28 bidders for 5G expansion in the 3,400 MHz millimeter wave spectrum.

Auction 105 completed in September 2020 was yet another big step in the American march toward 5G. The net proceeds totaled over $4.5 billion where a total of 228 bidders won 20,625 licenses.

As American companies chase their Chinese and European competitors for 5G dominance, there remain a number of challenges. Congress and the new Biden administration have to repurpose underutilized spectrum without penalizing incumbent spectrum holders. In their quest to recoup investment, the companies must resist the urge to exploit consumers who just cannot help themselves.

The path to 5G is pricey indeed, but it is lined with both promise and profit. While it may appear to be a sprint, the race is really a marathon that will be with us for quite some time to come.

Adonis Hoffman is CEO of The Advisory Counsel, Inc. He is a former chief of staff and senior legal advisor at the FCC and served in legal and policy positions in the U.S. House of Representatives. He has also served as an adjunct professor at Georgetown University. Follow him on Twitter @AdonisHoffman.