March 21, 2016 (Atlanta) –Verizon Communications Inc., AT&T, and T-Mobile USA have filed applications for the spectrum auction organized by the United States Federal Communications Corporation. The FCC has currently calculated a total of 104 applications, of which 69 have been completed. The auction is set to begin on the 29th of March, 2016.
The usage of mobile phones has reached an unprecedented rate. It is estimated that there are more connected devices than individuals located in the United States. At least seventy percent of people living in the United States are using smartphones that use mobile data. It is this usage that has spurred the Incentive Auction organized by the FCC.
The FCC allows television broadcasting licensees to hand over their spectrum usage privileges to them. The FCC then organizes an auction through which mobile phone carriers can purchase these spectrum rights. The broadcasters sell their licenses for decreased rates while the mobile carriers purchase them at higher prices. The disparity between these costs are usually awarded to the government.
There are over 2000 licenses that are qualified to be sold at the auction. Each of these licenses consist of a 6 Megahertz of a block of spectrum. The TV signals span a specific location. The spectrum that is most highly prized is the one that is referred to as low band spectrum. This spectrum is within the 600 Megahertz range. It is typically more valuable as it travels a greater distance and is more proficient at penetrating buildings.
Analysts have predicted optimistic proceeds for the 2016 auction, though they are not as high as the previous one. The spectrum auction is expected to garner within $15 billion and $45 billion U.S. dollars. There are other factors that may be a contributing factor to an increase in prices at the auction. This is following a trend that has been observed by several Wharton professors.
Several private equity firms have been acquiring licenses for independent TV stations. These firms have ownership over several spectrum licenses. When these licenses are turned over to the FCC and placed in the auction, there is a certain shift in the balance of power. The owners of several licenses can choose to withdraw a license, causing an increase in the cost of the other licenses. The FCC needs a specific number of licenses for the auction. When licenses become unavailable, the FCC will require another source and depending on the value of the license, theyhave to pay a higher price.
This hypothesized situation is relevant as it can cause an increase in the amount of money that mobile carriers spend, particularly the larger companies. If a certain number of licenses from particular stations are withdrawn, the profit for TV stations can equal a billion dollars. This means that the percentage that the stations receive would increase from one-third to around half. The majority of the increase in prices will be incurred by major mobile providers. This, in turn, will affect the other aspects of the business including the consumers of these services.
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