AGL Magazine - AGLM - June 2017

Regulation — End Of Broadcast Incentive Auction Brings More Questions Than Answers

2017-06-01 07:30:17

Regulation — End Of Broadcast Incentive Auction Brings More Questions Than Answers The industry is attempting to unpack the results of the recently ended FCC broadcast incentive auction, which was highlighted by T-Mobile US spending $7.9 billion, Dish Network spending $6.2 billion and Comcast spending $1.7 billion. Who won? Who lost? Where are the opportunities? Most of the initial work will focus on tall towers, as winning bidders hustle to clear broadcast stations from the radio-frequency spectrum in an activity known as the TV repack. Each broadcast station has unique requirements. Some stations will relinquish their TV channels. Other stations will move to different frequencies. And still other stations will move their channels in a virtual sense, but will actually start sharing other broadcast stations’ towers and channels. “The first step is to move the broadcasters off the frequencies, which will require a lot of work that is pretty specialized,” said Alex Gellman, cofounder and CEO of Vertical Bridge. “There will be the need for traditional wireless services providers, including tower climbers for line, transmitter and antenna work.” Wireless companies could start building facilities to use the 600-MHz channels on a market-by-market basis, or they could wait until the last of the broadcast stations exit, thereby leaving all of the spectrum clear. That process may take as long as three years to complete, because of the deadline the FCC set for broadcast stations to vacate the frequencies. “Normally, the tower industry sees a lot of deployment activity between 18 and 36 months after an auction,” Gellman said. “This one is going to take a little longer, as far as the wireless carriers go. Top bidder T-Mobile won 31 megahertz of spectrum nationwide, on average, or 45 percent of the spectrum auctioned, which quadrupled its lowband UHF holdings. The carrier has been preparing for the repack of the TV spectrum for some time. “T-Mobile wants to deploy this spectrum as quickly as possible,” said Gellman. “The market for broadcast tower services was a potential bottleneck that could slow down the TV repack, so the carrier has been actively growing that market.” Tower Industry Opportunities Vertical Bridge has identified areas where it has tall radio broadcast towers that can accommodate TV station antennas. “We are reaching out to the companies that sold off their spectrum to see how we can help,” Gellman said. “Broadcasters have options, and we want them to know that.” The majority of the opportunities for tower companies will have to wait until the spectrum is clear. “Secondarily, down the road, we see an opportunity related to deployment by U.S. Cellular, T-Mobile, AT&T, Comcast and Dish,” Gellman said. The major winners break down into three groups: carriers, new entrants and investors, each of which has different reasons for purchasing spectrum. T-Mobile T-Mobile is most likely to use the spectrum for coverage as it continues to catch up with Verizon Wireless and AT&T Mobility. It has deployed equipment to extend its network coverage using frequencies in the 700-MHz band during the last two years. “Spectrum at 600 MHz is not great for high-density deployments which is why the final bid numbers were not as high as some people speculated they would be,” Gellman said. “The final bid numbers were about half of that,” Gellman said. Comcast In April, as a mobile virtual network operator, Comcast began reselling airtime on the Verizon Wireless network, giving Xfinity Mobile customers access to unlimited data plans and access to millions of Comcast Wi-Fi hotspots. Gellman said Comcast will use its spectrum to build out a network, which would reduce its dependence on the Verizon network and therefore also reduce its operational expenses. Alex Gellman, co-founder and CEO, Vertical Bridge. “Having 600-MHz spectrum allows Comcast to provide a high and thin coverage blanket, and if the capacity gets exceeded, it can always fall back to the Verizon network,” he said. “The calculus is based on the economics of providing service. The 600-MHz band is good for propagation. It is not necessary good for capacity. Initially, it may work very well for them.” Craig Moffett, a senior research analyst at MoffettNathanson, was not quite as upbeat. Comcast’s 10-megahertz buy across its footprint fell well short of Moffett’s expectations of a 20-megahertz buy nationwide. “Comcast’s tepid participation inevitably makes one less confident that Comcast’s long-term intention is to go it alone,” he wrote. “Or to put it more bluntly, the odds that they will someday buy a wireless operator — read T-Mobile or Sprint — just went up.” Cory Crenshaw, president, Crenshaw Communications Consulting. Of all the wild cards in this auction, Dish is arguably the wildest. It already had lots of spectrum before the auction, including 40 megahertz in the AWS-4 (2000/2200 Mhz) band, 10 megahertz in the H-band and 6 megahertz at 700 Mhz, as well as 25 megahertz of AWS-3 spectrum, according to Zachs Investment Research. “With the broadcast incentive auction, Dish has invested billions of dollars in spectrum,” Gellman said. “Its spectrum buy confused many analysts. Will they kick the can down the road, will they truly deploy a commercial network for broad use, or will they sell it? I don’t think anyone knows yet.” Moffett was decidedly down on Dish’s spectrum buy, noting that it seemed to fly in the face of industry expectations that the company would either be purchased by a wireless carrier or it would sell its spectrum to a wireless carrier. “How can you reconcile the view that Dish Network [plans to sell its spectrum] with the fact that, by definition, they just outbid every possible buyer for precisely the same spectrum they would now hope to sell?” he wrote. If Dish is preparing for a merger, one of the possible acquirers — Verizon — didn’t even bid for spectrum, Moffett added. Regulatory Compliance Cory Crenshaw, president of Crenshaw Communications Consulting in Texas, said that if changing the physical plant was all that broadcast stations had to do during the TV repacking period, 39 months probably would be adequate. But she said the regulatory compliance process may prove to be an obstacle that could take six to 24 months or more. As a regulatory compliance consultant for FCC and Federal Aviation Administration matters, Crenshaw said the repack will require work on more structures than just the broadcast towers. She said there might be as many as 30 other communications structures spread out across the coverage area that feed into the network. Compliance filings may be needed for all of those structures, whether they are new towers, reinforcements, new antenna heights, lighting changes or environmental assessments. Speaking at the NATE Unite conference on Feb. 28 in Fort Worth, Texas, and in an interview with AGL Magazine, Crenshaw said every one of the towers in the network may need to be touched. “Those touches will require a massive volume of filings with the FCC and the FAA for repacking,” she said. Businesses in the wireless infrastructure industry must be vigilant in making regulatory filings with the FCC and the FAA from the start of repacking to have the best chance of completing the process before the FCC’s deadline, Crenshaw said. Applications for construction permits have to be filed no more than 90 days after April 13, the date on which the FCC released the closing and reassignment public notice for the auction. Applicants have some flexibility to expand contour coverage detailed in applications filed during the initial 90-day window — with justification and appropriate showings. For licensees that need to request the FCC to grant special temporary authority (STA) or a rule waiver to cover their wireless communications or broadcasting facilities’ operations, Crenshaw said it is important to file applications during the first 90 days. “Whenever you file an STA or a waiver on a major mandate like this, you must have a really good reason,” she said. “Be sure to give them a documentation trail on why this is justified. The reality is that some tower owners won’t know they need to file for a waiver on the scheduled deadline or any other waiver concern until they’re in the middle of a process.” Crenshaw said she expected that during the first 30 days after the FCC issued the closing and reassignment public notice, industry experts and specialists will have been busy performing thorough assessments of the broadcasters’ networks and what the infrastructure looks like. The work would be intended to answer several questions: What changes do they really need to make? Do new towers need to be built, do dishes need to be moved around, or does the backhaul need to revamped? “Once that is done, the proper paperwork should be filed with the corresponding federal agencies or Native American tribes as soon as possible,” Crenshaw said. The FCC reported that bidding in the auction closed on March 30, 2017, repurposing 84 megahertz of spectrum — 70 megahertz for licensed use and another 14 megahertz for wireless microphones and unlicensed use. The auction yielded $19.8 billion in revenue, including $10.05 billion for winning broadcast bidders and more than $7 billion to be deposited to the U.S. Treasury for deficit reduction.

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