Spectrum Pricing Trends in mmWave Bands

Countries across the world have been releasing new spectrum for 5G deployments in millimeter-wave spectrum bands (mmWave), while others are planning to do so soon.  Although a few governments have awarded mmWave spectrum via administrative processes at little or no cost to operators (Japan, Hong Kong), in most cases the procedure for licensing has involved auctions of 24 GHz, 26 GHz, 28 GHz, 37 GHz, 39 GHz, and 47 GHz.  The prices per MHz per POP of mmWave auctions have been close to the reserve prices set by regulators, with two important exceptions — Thailand and the U.S.

One factor explaining the low prices seen in these high-band auctions is the large multi-GHz amounts of bandwidth they offer.  As national markets on average have up to four mobile operators each, in many cases all national operators can acquire 1 GHz or more of 5G-mmWave spectrum without competing among themselves for the same frequencies. In addition to the large blocks of bandwidth available, these bands’ short propagation ranges require very closely spaced base stations, or network densification, further influencing operators’ valuations of this spectrum given its higher costs of deployment. These two structural factors explain why the prices paid for mmWave spectrum are much lower than for the 3.5 GHz and other mid and lower bands. 

Auctions in Italy (26 GHz), South Korea (28 GHz), and Taiwan (28 GHz) resulted in mobile operators paying the reserve price or an amount that is only slightly higher. This outcome raises the question of why final prices were well above the reserve price in two other countries, namely in Thailand’s 26 GHz auction and in three auctions in the U.S. in the 24 GHz, 28 GHz, and 39 GHz bands, as shown in the graph below. The actual prices paid for mmWave spectrum in all these countries in auctions held between 2018 and Q1 2020 are shown in the Table which follows.

Regulators should release mmWave bands simultaneously or in rapid sequencing following the release of mid-band spectrum. 

Auction Prices for mmWave Spectrum

Country	USD per MHz-POP
U.S.	24 GHz: 0.009112 28 GHz: 0.0113 39 GHz: 0.009613 47 GHz: 0.001099
South Korea	28 GHz: 0.004547
Thailand	26 GHz: 0.001959
Taiwan	28 GHz: 0.001422
Italy	26 GHz: 0.003157

When mmWave is auctioned or released for 5G before sub-6 GHz mid-bands in a country, and there is uncertainty regarding the future availability of 3.5 GHz, operators compete fiercely for mmWave bands to acquire some spectrum in which to launch 5G. The result is final auction prices well above the reserve price. Thailand and the U.S. were both in this situation.  In Thailand, the 3.5 GHz band is used for satellite broadcasting services and is not yet available for 5G nor is it established when it might be. Thailand raised a total of $372 million from four service providers in an auction completed in February 2020 for 2600 MHz of millimeter wave spectrum between 24.5 GHz and 27.1 GHz.  This amount was 49% above the reserve price.

In the U.S., the Federal Communications Commission (FCC) has conducted three auctions of millimeter wave spectrum over the past two years, in the 24 GHz and 28 GHz bands, and most recently a multiband auction including 37 GHz, 39 GHz, and 47 GHz frequencies.  Each auction was successful in its own right, raising a combined total of $10.3 billion in winning bids.  The final prices were between six times (6x) and sixteen times (16x) the starting prices, as a result of strong competition between a large number of bidders, 35 to 40 in each of the auctions.

U.S. auctions typically attract a larger number of bidders than anywhere else thanks to a vibrant secondary market for spectrum trading.  Before these FCC auctions, the two largest operators–Verizon and AT&T–had both acquired spectrum in the secondary markets.  However, in contrast to other countries which have already assigned 3.5 GHz spectrum, U.S. operators are still awaiting the FCC’s auction of the CBRS band (3550-3700 MHz) that is scheduled for July (delayed by one month due to the coronavirus epidemic) and the lower 280 MHz in the C-band (3.7-4.2 GHz), which is currently scheduled for December 2020.

mmWave bands are essential for achieving the maximum performance targets of the 5G standard in terms of speed/capacity and latency. Bands between 24 GHz and 100 GHz include abundant amounts of the bandwidth crucial to support the most demanding 5G applications, which require very high speeds and/or very low latency, such as industrial automation, applications of virtual reality in health care and online games, and Ultra High Definition (UHD) video streaming. These bands fulfill the promise that 5G will be a radical step up from 4G. They are an essential complement to low sub-1 GHz bands and mid-bands in the sub-6 GHz range, which can cover an area more economically but deliver lower performance than mmWave. 

The data we present could tempt electronic communications regulators to release mmWave bands before mid-bands to maximize auction bids, but this would be detrimental to consumers and service providers since mid-bands are the backbone for 5G traffic. Rather, they should consider releasing mmWave bands simultaneously or in rapid sequencing following the release of mid-band spectrum.  This approach could mitigate the risk that service providers spend too much money on acquiring spectrum licenses which would materially reduce their investments in 5G infrastructure buildout.

Frank Rayal is Partner at Xona Partners.

Martyn Roetter is Director of Research at TechPolis, holds a Ph.D. in Physics from Oxford University, and has extensive technology consulting experience.