Verizon Emerges as the Challenger for Straight Path’s 5G Spectrum

April 27, 2017

April 27, 2017 —

By J. Sharpe Smith

Senior Editor, AGL eDigest

Reuters broke the story this week that Verizon Communications is indeed the mystery bidder that made it a $104.64 per-share all-stock buyout offer for a company called Straight Path, which topped AT&T’s $95.63 per share earlier this month. The deal would work out to about $1.8 billion versus the $1.6 billion ponied up by AT&T.

Straight Path, which holds a nationwide portfolio of mmWave spectrum, including 133 licenses in the 28 GHz band and 735 licenses in the 39 GHz band, has been rumored as a takeover target. Especially after the FCC told it to sell all of its licenses or be fined $100 million, after it did not build out its network. If the deal goes through, the U.S. government will get 20 percent of $1.8 billion, or $360 million.

As carriers moved to secure their footing for the 5G push, XO Communications and Fiber had been snapped up rather quietly. No so with Straight Path. The reason for the bidding war is not a dearth of long-term spectrum opportunities, according to Craig Moffett, MoffettNathanson.

“It’s hard to see the bidding war for Straight Path as anything other than a timing hedge against a delayed millimeter wave auction from the FCC,” he said in an email. “There will ultimately be a ton of this spectrum coming to market. But after a disappointing incentive auction, there is a real chance that the FCC decides to wait a while before moving forward with what would be another big bite for the wireless operators’ stretched balance sheets.”

Last July, the FCC wrote spectrum holdings policies for the 28 GHz, 37 GHz, and 39 GHz bands that will facilitate license acquired through auctions and the secondary market.

In 2018, FCC plans to auction 200 MHz of 28 GHz spectrum in small markets, 450 MHz of 39 GHz spectrum in small markets, and 1,000 MHz at 37 GHz nationwide, according to the April 18th Equity Research “5G Trials – What We’ve Learned Thus Far,” published by RBC Capital Markets.

A Short History of 5G Spectrum

The FCC anticipated increased interest in using the millimeter wave spectrum back in 2003 when it established service rules to promote non-Federal Government development in the 71-76 GHz, 81-86 GHz and 92-95 GHz bands on a shared basis with Federal Government operations (FCC 05-45).

Last year, in July, the commission went further to create a 5G spectrum sandbox, where wireless hopes to play. In several bands, the FCC sought to create service rules for 5G services where satellite companies are a big player, along with a ton of federal use. Among the rules changes, mobile use was allowed on some satellite spectrum, wide bands were created and unlicensed rules were authorized. adopting a band plan that included mobile use, flexible use, unlicensed, and sharing policies in the bands while protecting existing federal users

In the 27.5-28.35 GHz and 38.6-40 GHz bands, mobile use was authorized, and a band plan was created for commercial operations between the 37 and 39 GHz bands. Additionally, operations in the 64-71 GHz band were authorized under Part 15, similar to the adjacent 57-64 GHz band.

Rules were created to allow satellite companies to use their spectrum for terrestrial use. Broadcasting and broadcasting-satellite service allocations were deleted from the 42-42.5 GHz band (42 GHz band) and it declined to allocate the band to the fixed-satellite service (space-to-Earth). Remember, later in the year, in December, the FCC changed the rules to allow Globalstar to use its satellite spectrum for a low-power terrestrial broadband network in the licensed spectrum at 2.4 GHz.

Mobile operating rights were granted to existing Local Multipoint Distribution Service in the 1,300 megahertz of spectrum in the 27.5 GHz to 31.3 GHz band, as well as for the 39 GHz band licensees,

5G Trials

Initial 5G implementations in the U.S. generally will fall within the 24-25 GHz, 28 GHz, 37 GHz, and 39 GHz bands, and to a lesser extent, 3.4-4.2 GHz, according to RBC Capital Markets, and the United States plans to propose spectrum bands including 27.5-29.5 GHz, 37-40.5 GHz, 47.2-50.2 GHz, 50.4-52.6 GHz and 59.3-71 GHz at ITU’s World Radiocommunication Conference in October 2019.

To figure out which carrier will use which spectrum out of all these possibilities, look at the 5G trials that are currently underway. Verizon’s trials have used frequencies between 28-40 GHz for high-capacity fixed access, and AT&T’s are frequencies between 3.4 GHz to 4.2 GHz, which are more suited toward mobile, according to RBC Capital Markets.

While silent on the licensed spectrum front, T-Mobile has petitioned the FCC for an experimental license in the 3550-3700 MHz band to test wave propagation characteristics “new innovative services.” The carrier wants to test 10 equipment prototypes in outdoor and indoor setting prior to equipment certification.