Analysis of Auction 66 - Advanced Wireless Services (AWS) Spectrum

Overall, the price per MHzPop multiples increased as the population served by the license increased. The CMA licenses, which serve an average population of 397,499, went for a weighted average price per MHzPop of $0.40. This is compared to $0.46 for the Economic Area (EA) Group licenses and $0.66 for the Regional Economic Area Grouping (REAG) licenses, which serve much larger areas with average populations of just over 1.6 million and 30.9 million, respectively.

In further analyzing the multiples (and shown in the table below), it was determined that the 10 MHz EA licenses sold for about 15% more than the 20 MHz EA licenses. Multiples paid for the 20 MHz licenses were expected to be higher (on average) than the 10 MHz licenses, as larger blocks of spectrum are typically viewed as more desirable and are in higher demand. One explanation for this surprise event could be that bidders used the smaller markets to fill in gaps in their existing spectrum holdings and may not have needed as much spectrum over certain market areas, resulting in higher prices paid for the 10 MHz EA licenses. As more details are disclosed regarding the specific use of the spectrum and new business plans evolve, the explanation may become more evident.

Unlike the 20 MHz EA licenses, the 20 MHz REAG licenses, which cover greater populations, sold for approximately 24% more than the 10 MHz REAG licenses, with weighted average price per MHzPop multiples of $0.73 and $0.59, respectively. As expected, the largest winners of the REAG licenses were T-Mobile and Verizon, who paid $2.9 billion and $2.8 billion, respectively.

T-Mobile and Verizon were expected to be very active in the auction, as they needed to obtain more spectrum in order to remain competitive with the other major wireless carriers. Overall, T-Mobile was the largest winner, spending nearly $4.2 billion, close to 50% more than the next highest bidder, which was Verizon, who won a total of 13 licenses for just over $2.8 billion. The table below shows the Top 10 Bidders by total winning bids and the weighted average price per MHzPop paid for the licenses.

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While some industry analysts projected the auction might bring in $20 to $25 billion, the consensus seems to be that the auction was a success given the types of bidders competing and the large amount of spectrum being auctioned. However, the true measure of success will more likely be discussed in the coming months in terms of the impact on the wireless broadband market.

(1) The Gulf of Mexico licenses were excluded from this analysis because population information was not available.
(2) MHzPop is defined as the total number of megahertz (MHz) of spectrum times the population served of each license.