Is 4.9 GHz a $14 Billion Spectrum Windfall?

I've been reading everything about the 4.9 GHz Public Safety band in the news and the efforts to refine its rules for more efficient use. These reports all talk about a potential windfall with AT&T, so I thought, what gives?

What is the 4.9 GHz??

The Federal Communications Commission (FCC) established the 4.9 GHz band in 2003 for public safety users. The band is 50 MHz in size and operates from 4,940 to 4,990 MHz. If you look at the FCC's Universal Licensing System (ULS), you'll find 3,696 currently active licensees for municipalities, police departments, and fire departments – a clear set of users for the band.

Fast-forward to last year, and given the ongoing spectrum pipeline challenges, the FCC opened a proceeding to determine what to do with the band going forward. The belief is that there is a way to share this band more efficiently, potentially even with non-public safety users. The FCC proposed establishing a "band manager" who could coordinate usage on a nationwide level to create more efficiency.

At the same time, there is movement around the globe for "Band 79," a global 5G band that operates directly in that 4.9 GHz space. As a result, these developments created some battle lines around the concept of "FirstNet."

What is FirstNet?

In 2008, the FCC ran spectrum Auction 73, which largely auctioned the 700 MHz band. One of the blocks, the Upper 700 MHz D block, had specific rules, the most important of which is this: it had to be used for public safety. Most major operators did not really understand what that could mean and, thus, acting in a risk-averse manner, did not bid for the spectrum, which went unsold. The FCC then had to figure out what to do with it.

Nearly ten years later, the answer was "FirstNet," a communications platform established under the National Telecommunications and Information Administration (NTIA). In an overly simplistic definition, FirstNet is essentially a public-private partnership model that facilitates decisions on what to do with that spectrum, among other issues of providing first responder communications.?

In 2016, FirstNet ran an RFP process to select a nationwide operator to build a nationwide public safety network with the band. After a very contentious process, AT&T won the FirstNet contract. It's important to remember that up to that point, Verizon was the market share leader regarding public safety. Establishing FirstNet and awarding it to AT&T created a major competitor to Verizon's public safety business.

As a result of the RFP win, AT&T had access to the 20 MHz of the "FirstNet" spectrum and received $7 billion to deploy it across their network, which was completed last year. The spectrum could be used for commercial users but was preemptible by any FirstNet authorized user.

AT&T used a smart cost-saving method when deploying the FirstNet spectrum. When they needed to climb a tower to install a FirstNet "Band 14" radio, they took the opportunity to install any other required radios at the same time. This "one climb" approach helped them expand their network efficiently by minimizing the number of climbs needed, thus reducing overall tower climb costs. In some portions of the market, there was concern that AT&T had been able to build their own network on the taxpayer dime – whether you believe it or not, $7 billion is not chump change!

The Current Issue

In a recent proposal, the Public Safety Spectrum Alliance (PSSA) suggested that FirstNet should be the band manager. The PSSA is a sub-group of the Public Safety Broadband Technology Association, which is nothing more than a FirstNet user organization.?

This is when the knives came out. Verizon and others formed a competing advocacy group and said that if FirstNet gets the spectrum band manager role, it will award the spectrum to AT&T, which has the FirstNet contract. Assuming prices similar to what the C-band went for in Auction 107 implies a nearly $14 billion value and, they argued, a potential windfall for AT&T.

Instead, they suggested an auction as the appropriate way to handle that spectrum. This is where I wanted to weigh in.

What about an auction?

If the FCC wants to auction the 4.9 GHz, there are a few things to resolve.

What do you do with the licensees?

• What happens to the nearly 3,700 active licenses across the U.S., and how does the band manager "take care" of their interests?
• How does this impact the value of the spectrum?
• Do you conduct a "reverse-forward" auction so they get compensated? Would you do a "repack" where they get reimbursed for actual relocation costs? Do they get some other benefit native to public safety by giving back the spectrum to a specific network entity?

What would you license?

• What is the actual license for? How could you offer it?
• Is it preemptible? Can it be used for commercial uses?
• Who will likely show up at an auction if these factors drive its value?

What is the resulting auction "product" for sale?

• Current band 79 can operate with channels as low as 10 MHz and up to 50 MHz.
• However, 5G operations are best when there are large contiguous blocks of "Time Division Duplexing" TDD spectrum of 40 MHz or more.
• Does the FCC want to do 10 MHz licenses like Auction 110, or would they recognize the value of larger blocks and set "winner takes all" license areas across geographies?
• Public safety boundaries can be gray as they move to adjacent areas in emergencies, so what is the right license size?

When will they get the authority to do this?

• It's no secret that the FCC still has no auction authority, exacerbating the spectrum delays in the industry.
• All of this scenario is hypothetical until this gets resolved.

Ultimately, the wireless industry is experiencing a major capital crunch and downturn that resembles the dot-com bust every day. A new spectrum auction could jumpstart investment and get the industry back on a growing trend (at least for the broad ecosystem of wireless vendors). If this new 4.9 GHz band was offered as a 5G network vs. FirstNet’s current 4G LTE network, this new spectrum could also unlock new use cases for first responders, which could drive both financial and societal value.

Given these dynamics, it is critical to pay attention to what happens with the band and its potential to attract additional investment into the industry. Stay tuned!

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