How Race to 5G in U.S. Hit Speed Bump Called C-Band


(Bloomberg) -- From ovens to refrigerators, automobiles to surgeon’s tools, more and more items are connected wirelessly to the internet. As use of such devices soars, so does the demand for airwaves to carry all that data. The need for more space -- more spectrum -- to carry mobile signals is causing friction in a once-placid policy arena. A swath of airwaves known as the C-band will soon be put up for auction, following a lobbying fight over how much foreign satellite companies should receive from the multibillion-dollar pot.

1. What are airwaves, exactly?

The term refers to the invisible electromagnetic waves that carry information through the atmosphere to our smartphones -- and to TVs, radios, iPads, ships at sea, aircraft, garage-door openers and any other gadgets that send or take in signals wirelessly. The so-called electromagnetic spectrum encompasses the full range of airwaves, from tiny, high-frequency waves like those used in radiation therapy to longer, low-frequency waves such as those that deliver radio programming. High-frequency waves can carry a lot of information but don’t go far and can be stopped by walls or even rain. Low-frequency waves go far and penetrate obstacles but don’t carry a lot of information. Of particular value in this wireless age are mid-band airwaves that can carry ample data for significant distances. One of those is the C-band.

How Race to 5G in U.S. Hit Speed Bump Called C-Band

2. What’s the fight over C-band?

This part of the spectrum offers an ideal mix of coverage and capacity to carry the emerging 5G wireless technology that promises data speeds 100 times faster than those of recent years. Until now, the C-band has been used by satellite providers to beam programs down to TV and radio stations around the country. The U.S. Federal Communications Commission wants to open some of the C-band to 5G uses, a shift that would dramatically increase demand for those frequencies.

3. Who owns the airwaves?

That’s a tricky question. By law, U.S. airwaves belong to the public; the federal government grants rights, expressed as licenses, to companies to use certain frequencies. These rights are rarely revoked, and when companies with licenses are sold, the airwaves rights typically transfer -- commanding a hefty premium from the buyer. In recent years, the FCC has arranged payment for TV broadcasters to leave frequencies that are needed for mobile uses.

4. Who has the C-band licenses?

Four satellite companies dominate activity in the C-band in the U.S. The two biggest are Intelsat SA and SES SA, both based in Luxembourg, which between them control about 90% of commercial traffic. Along with Telesat Canada of Ottawa, which also owns some C-band rights in the U.S., these companies made up the C-Band Alliance (CBA), which was formed in 2018 to push their ideas on how best to sell rights to their portion of the spectrum. (A fourth founding member, Paris-based Eutelsat SA, dropped out of the alliance.) All four would receive payments for giving up airwaves under the FCC’s plan. The fact that none of the companies is U.S.-based has drawn the attention of some members of the U.S. Congress who question letting foreign firms profit from American airwaves.

5. How will C-band rights be sold?

That cuts to the heart of the dispute surrounding the sale. The C-Band Alliance, led by Intelsat and SES, lobbied for a private auction -- a sale they would run, in other words. That idea generated criticism that it wouldn’t guarantee a fair shot at the airwaves by all players and wouldn’t guarantee any money to taxpayers (even though the C-Band Alliance promised to pay prearranged percentages of the sales prices to the U.S. Treasury). Now the sale is headed in a more traditional direction. FCC Chairman Ajit Pai has called for a public auction run by the agency’s staff members who have conducted scores of airwaves auctions over the past two decades.

6. Why does the type of auction matter?

One point of contention was which process would succeed more swiftly in putting the spectrum in new hands, furthering development of 5G. The C-Band Alliance had said its private auction could deliver the airwaves more quickly than a traditional FCC auction, which can take years from inception to completion. Pai didn’t contest a lawmaker’s estimate, at a Senate hearing last October, that a public auction could take as long as three years. But he still set a goal of starting the public FCC auction this year, indicating optimism much of the preliminary work has been done.

7. What’s likely to happen in the public auction?

Companies that may move to snap up C-band frequencies include mobile providers AT&T Inc., Verizon Communications Inc. and T-Mobile US Inc., plus Charter Communications Inc., a cable provider that could use more airwaves to serve its growing legion of customers that use mobile phones and wireless tablets to access internet content and TV shows. Analysts at Bloomberg Intelligence estimate that selling the airwaves could fetch $35 billion to $40 billion. New Street Research analyst Vivek Stalam, in a Nov. 13 note, said the price could reach $50 billion. Estimates by other analysts have gone as high as $60 billion.

8. Who gets the proceeds?

That’s been another point of dispute. Intelsat and SES (and, to a lesser extent, Telesat and Eutelsat) are in line for a cut measured cumulatively in the billions of dollars. But how much? The FCC announced a plan that would provide $9.7 billion in compensation if the companies hit deadlines for leaving the airwaves quickly, and another $3.3 billion to $5.2 billion to pay for costs of making the switch. Intelsat, which is counting on the proceeds to reduce some of its $14 billion debt load, said it wants more. Some U.S. senators wanted to require that U.S. taxpayers reap at least half the proceeds, but a lack of consensus stalled the matter in Congress.

9. How are other countries handling this issue?

Some have moved faster to free mid-band airwaves for use by mobile communications. South Korea, the U.K., Spain, Italy, Austria and Switzerland all held auctions recently, while Germany and Japan laid plans and China allocated airwaves for carriers, according to FCC Commissioner Jessica Rosenworcel. That puts the U.S. behind in some aspects of what the wireless industry calls “The Race to 5G.” The term refers to efforts to establish a 5G network before other countries do, in order to foster the same type of tech leadership that helped boost world-leading brands such as Qualcomm Inc., Intel Corp. and Silicon Valley companies such as Google and Facebook Inc.

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