Everyone wins who doesn't own spectrum.sold auction180 Beneath all the rhetoric, spectrum prices should be coming down around the world. Wireless technology is moving so fast that there just isn't much need for more spectrum. The spectrum price fall in the U.S. and the low bids in India suggest a general trend worldwide, but predicting auctions is very tricky. I've been writing "An Age of Wireless Abundance" for the last two months, but didn't call the auction. Tim Farrar had perspective last fall and a prescient call a month ago.  

John Hodulik's and Craig Moffett's notes this morning showed why they are the best on Wall Street. John wrote, "This brings the broadcaster ask well below our prior expectations for forward auction proceeds." Kudos also to Brett Feldman of Goldman for, "We estimate that the auction will end with just under $18bn of bids, implying a valuation of $0.86/MHz/POP, which is half of our generic ‘low-band’ spectrum value estimate of $1.69." Few in the public eye are frank about mistakes like this, but we all make them. Honest admissions earn respect.

Moffett looked at the implications in the U.S. of prices he expects, "radically lower than recent benchmarks." He concluded, "At $1.00 per MHz-POP, Dish’s shares would be worth about just over a third of their recent trading range." I saw the same thing last night. I'm amazed the price of DISH didn't go down yet as I write this.

Craig went on to discuss what clearly now is a buyer's market for spectrum.

He notes that Verizon has "balance sheet constraints." AT&T's "balance sheet is stretched to the breaking point." Craig has been pointing out how hard they've had to work just to cover their dividends. They continue to raise dividends every year to inflate the stock price, but earnings have been flat to down. Both should be cutting dividends but fear the stock price - and CEO options - would collapse. Both will remain among the most profitable companies in the world for years, but the stock price needs to come down to connect to reality. They are masters of creative accounting, but common sense suggests they should be taking large writeoffs soon on spectrum value. If they don't, they have been undervaluing spectrum for years. The accounting rules are so imprecise they probably haven't broken the law. Telco balance sheets, at least in the U.S., should be considered fiction. The same is true of the absolute level of capex. Steve Levy back in the days of Lehman Brothers compared the reported capex to the visible actual investment costs. About half was unexplained, implying that the telcos were burying operating expenses in capex, raising measures of earnings. For a decade, the top analysts have been tracking company cash flow, because reported earnings are so easy to manipulate.

Also hanging over DISH are "build-out requirements that it simply can’t realistically meet on its own." Some come due in two months. Farrar thinks the $hundreds of million settlement with Straight Path sets a precedent for how to treat DISH. They could, and should, lose spectrum they value in the $billions.  

If the new FCC chair has any courage, they can create a fifth U.S. competitor simply by forcing Charlie Ergen to live up to the terms of his license agreements. I believe making sure we have plenty of competition (and good information) should be the first priority for anyone who believes in "markets." Just getting government out of the way rarely works in capital heavy businesses like telecom. The public actions of likely FCC candidates like Jeff Eisenach and Ajit Pai suggest they disagree. Both are very smart and I believe dedicated to the public interest. If they take strong actions against market power, they will surprise their critics.

 

 

 

 

dave ask

Newsfeed

The 3.3-4.2 spectrum should be shared, not exclusively used by one company, concludes an important U.S. Defense Innovation Board report. If more wireless broadband is important, sharing is of course right because shared networks can yield far more

It does work! Verizon's mmWave tests over a gigabit in the real world. 
The $669 OnePlus 7 Pro outclasses the best Apples and probably the new Galaxy 10 or Huawei P30 Pro. Optical zoom, three cameras, liquid cooling, Qualcomm 855 and more.
Korea at 400,000 5G May 15. Chinese "pre-commercial" signing customers, 60,000-120,000 base stations in 2019, million+ remarkable soon. 
5G phones Huawei Mate 20, Samsung Galaxy 10, ZTE Nubia, LG V50, and OPPO are all on sale at China Unicom. All cost US$1,000 to 1,500 before subsidy. Xiaomi promises US$600.
Natural monopoly? Vodafone & Telecom Italia to share 5G, invite all other companies to join.
Huawei predicts 5G phones for US$200 in 2021, $300 even earlier
NY Times says "5G is dangerous" is a Russian plot. Really.
Althiostar raised US$114 million for a virtual RAN system in the cloud. Rakuten, Japan's new #4, is using it and invested.
Ireland is proposing a US$3 billion subsidy for rural fibre that will be much too expensive. Politics.
Telefonica Brazil has 9M FTTH homes passed and will add 6M more within two years. Adjusted for population, that's more than the U.S. The CEO publicly urged other carriers to raise prices together.
CableLabs and Cisco have developed Low Latency XHaul (LLX) with 5-15 ms latency for 5G backhaul,  U.S. cable is soon to come in very strong in wireless. Details 
Korea Telecom won 100,000 5G customers in the first month. SK & LG added 150,000 more. KT has 37,500 cells. planning 90% of the country by yearend. 
The Chinese giants expect 60,000 to 90,000 5G cells by the end of 2019.
China Telecom's Yang Xin warns, "Real large-scale deployment of operators' edge computing may be after 2021." Customers are hard to find.
Reliance Jio registered 97.5% 4G availability across India in Open Signal testing. Best in world.

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Welcome On Oct 1, 2019 Verizon turned on the first $20B 5G mmWave network with extraordinary hopes. The actual early results have been dismal. Good engineers tell me that will change. Meanwhile, the hype is unreal. Time for reporting closer to the truth.

The estimates you hear about 5G costs are wildly exaggerated. Verizon is building the most advanced wireless network while reducing capex. Deutsche Telekom and Orange/France Telecom also confirm they won't raise capex.

Massive MIMO in either 4G or "5G" can increase capacity 3X to 7X, including putting 2.3 GHz to 4.2 GHz to use. Carrier Aggregation, 256 QAM, and other tools double and triple that. Verizon sees cost/bit dropping 40% per year.

Cisco & others see traffic growth slowing to 30%/year or less.  I infer overcapacity almost everywhere.  

Believe it or not, 80% of 5G (mid-band) for several years will be slower than good 4G, which is more developed.