700 MHz Auction Ends; What’s the Value of UHF TV Spectrum?

Because most of the licenses were auctioned by area, there was a wide range of prices in the winning bids.
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One of the first questions I received after the winning bidders of the 700 MHz auction were announced on Thursday came from a broadcaster asking if they could get a similar return from their UHF TV spectrum. I’d anticipated this question and in my article, “FCC Proposes Minimum Bids for 700 MHz Auction” in the Aug. 24, 2007, RF Report, I calculated the value of each spectrum block in relation to a 6 MHz wide TV channel. The most expensive was the Block C spectrum, which was offered in 12 regional licenses at a minimum-bid price of more than $105 million per 6 MHz-wide block per license.

Because most of the licenses were auctioned by area, there was a wide range of prices in the winning bids. For example, in Block A, which consists of TV channels 52 and 57, the first license on the list, Bangor, Maine, was won for about $729 thousand, which works out to more than $364,000 per 6-MHz, the width of a TV channel. Compare this to the winning bid from Verizon Wireless for the two 6 MHz Block A channels in a region that includes Los Angeles, Riverside and Orange counties in southern California, $580 million, or $290 million per 6 MHz channel, the same order of magnitude as the prices paid for top-market TV stations.

Of course, there is a big difference the way the auction winners will be able to use this spectrum compared to how TV broadcasters can use their 6 MHz of spectrum. Auction winners will be limited in the power for each transmitter, but will be able to employ hundreds or thousands of transmitters in a cellular system allowing frequencies to be reused throughout the area. This provides a total “to user” capacity far exceeding what a broadcaster can do with their 6 MHz spectrum that can only be used once over their entire coverage area.

The Block C spectrum, because of its regional coverage and open access requirements attracted much attention. Cellco Partnership (doing business as Verizon Wireless) won seven of the regions, including all U.S. states except Alaska. Other companies won the auction for Block C spectrum in the Gulf of Mexico, Alaska, Puerto Rico and the U.S. Virgin Islands, American Samoa, and the region including Guam and Northern Mariana Islands. I was surprised to see the most expensive region was the Mississippi Valley, at $1.6 billion ($443 million per 6 MHz) followed by the Great Lakes at $1.1 billion ($302 million per 6 MHz). The “West” region was a relative bargain at $319 million ($87 million per 6 MHz channel).

Refer back to the list of winning bidders if you want to compute the value of 6-MHz of spectrum in other regions or markets.

What do the prices in this auction mean to broadcasters? First, spectrum, at least in the larger markets, is very valuable. Second, the winning bidders (usually Verizon or AT&T) are probably not going to want to use this expensive spectrum for broadcast services such as MediaFLO, but instead employ a cellular architecture for Internet, messaging, communication and other point-to-point services. It makes more sense to send any broadcast transmissions, whether real-time like traditional broadcasting or non-real-time such as file transfers of video clips, programs, and advertisements for playback on demand or on-location, over the current DTV broadcast infrastructure using standards such as ATSC M/H (currently being developed on a very short timeline) rather than tear out a sizeable chunk of spectrum over the entire wireless network to carry TV programming.

Radio and later TV broadcasting were the original “wireless” technologies. Over the past 30 years or so TV broadcasting has become dependent on cable TV companies and satellite operators to deliver their programming to viewers. The results of this auction indicate the market still places a lot of value on terrestrial wireless technology. It’s also a warning that if broadcasters don’t value and protect their over-the-air spectrum, there are others that recognize its worth and are likely to go after it! Broadcasters must make sure that spectrum is being used in the way that provides the most value to the public. Fortunately, groups such as the Open Mobile Video Coalition (OMVC), supported by standards organizations like ATSC, are working to provide broadcasters new business options and new technologies to optimize their use of the broadcast TV spectrum.