The Federal Communications Commission (FCC) has auctioned off AWS-3 frequencies, and total bids have reached more than $30 billion on Nov. 21, surpassing the reserve price of $10.1 billion.
The auction, the biggest chance for wireless carriers to gain access to new frequencies since 2008, is the first major sale the FCC has had in six years. It is called Auction 97 and involves companies like Dish Networks, America Movil, T-Mobile U.S., and AT&T. Until the auction ends, investors won't know which of the companies won certain frequencies. Typically though, the most sought-after airwaves are bid on first, like a block in New York City, which was sold for a reported $1.19 billion.
Why should this auction matter to consumers?
Think of the frequencies being bid on as interstates highways. It is through these frequencies that data travel on. If data were like cars, then it follows that the more cars there are, the likelier it is for a traffic jam to build up.
In 2013, mobile data use reached 81 percent year-over-year, growing 18 fold since 2000. This means every year frequencies have to handle more and more data, which will eventually lead to congestion. Much like roads, the only way to prevent data congestion is to make sure that there are enough frequencies to handle the traffic.
With telecoms participating in Auction 97, this means that new frequencies will be added, allowing more data to be shared. Of course, only subscribers under a certain company can use the frequency that the company owns.
Because the only time telecom companies can acquire new frequencies is during an FCC auction, Auction 97 is their big chance to expand their highways. When highways are expanded, consumers will benefit from faster service.
What was expected to be a ho-hum affair that started on Nov 13 is clearly seeing activity.
According to Jonathan Chaplin, a New Street Research telecom analyst, all the attention surrounding the auction is happening because spectrum is an important raw material that determines wireless data capacity. It's in short supply now so it's only natural that telecom companies will be raring to get their hands on more.
At the rate it's going, Auction 97 is set to become the most lucrative of airwave auctions in the U.S. Analysts are expressing surprise at the sheer interest in the auction although pleased that projections are being shattered. Usually, there's more interest in auctions for television broadcasters, the next one of which is scheduled for early 2016.