Select Spectrum to host EBS and BRS Lease Auction in October 2015

EBS license holders can monetize longstanding spectrum holdings and rural/suburban/metropolitan fixed and mobile broadband commercial ventures can be stimulated with this annual Spectrum Lease Auction.

This October, Select Spectrum, LLC will host a clearinghouse style auction to facilitate the matching of EBS and BRS Spectrum holders with interested lessees of this spectrum.  As our nation struggles with lack of spectrum to carry mobile and fixed wireless broadband signals, this auction will attempt to unlock the potential of often unused or little used spectrum in the 2.5 and 2.6 GHz bands.  The auction will be a great opportunity to pair educational and government entities, who are the license holders, with wireless broadband providers who are interested in leasing this spectrum.  This is a great way to use our nation’s finite spectrum resources more efficiently, earn money for our educational institutions and provide more spectrum for broadband delivery.

Historically, in 1963 the FCC authorized the Instructional Television Fixed Service band.  These 20 microwave TV Channels were made available to be licensed to local credit granting educational institutions.  However, in the late 1970’s the FCC recognized that many ITFS licensees lacked the technical expertise and/or financing means to effectively use their spectrum holdings.  Thus the FCC authorized “leasing excess capacity” as a way to more effectively use this spectrum.  EBS leases were often combined with Multichannel Multipoint Distribution Service (MMDS) licenses to provide a service typically known as “wireless cable”.  In 2003, the FCC begin repurposing ITFS and MMDS spectrum for wireless broadband service and subsequently renamed the bands EBS and BRS.  Craig McCaw’s Clearwire became the largest commercial operator to lease EBS spectrum.  Clearwire later sold to Sprint.

Two-way, mobile and fixed data services, including Internet access are allowed uses of EBS and BRS spectrum.  The licenses are subject to FCC Part 27 rules.  4G, LTE and WiMAX products are available by a variety of manufacturers to build wireless broadband networks in these bands.  Although at least 5% of the spectrum capacity must be reserved for educational use, the remaining 95% can be leased to commercial operators.

Spectrum auctions have become popular in recent years to license new allocations of mobile and fixed wireless broadband spectrum.  These auctions have typically been dominated by large mobile commercial operators such as Verizon, AT&T, T-Mobile, Sprint, Dish Networks and others. For the most part, smaller local and regional wireless broadband providers have all but been locked out of these auctions because of price and geographic market size.  This fall’s auction is different than spectrum ownership auctions.  This auction as previously stated, is a clearinghouse auction to bring license holders and commercial operators together, to facilitate “leases” of exclusive “Geographic Service Areas” (“GSA”).  Each GSA is typically a 35 mile radius cell.  In many cases, one or more sides of the resulting circle are lopped off to avoid overlap with neighboring GSA licenses. The relatively small size of each GSA license should attract a larger field of potential bidders.

Below is the Post Transition Band Plan for EBS (red) and BRS (Blue and Green) channels.

Many educational license holders are only vaguely familiar with their spectrum holdings.  Many of these licenses were issued 50 years ago.  Newer employees are either unaware of the holdings or are not knowledgeable or skilled in spectrum leasing procedures.  Therefore, much of this spectrum remains dormant and often requests to lease the spectrum licenses are ignored.  The Spectrum Lease Auction essentially provides a “show me the money” incentive to the educational institutions to stimulate reaction to lease spectrum to commercial operators. In other words, the auction will make it easy for the educational institutions to find the best lease offer for their spectrum assets.

The 2015 Spectrum Lease Auction will offer:

1. EBS licenses not subject to an existing lease
2. EBS licenses where the existing lease will expire soon
3. EBS leases to purchase (from an existing lessee)
4. BRS licenses for lease or sale

Participation in the spectrum lease auction if free of charge.  Only winning bidders and ultimately successful lessees have financial obligations.  Contact one of the agents to apply.

When valuing spectrum, the typical unit of measurement is called MHz-POP.  A MHz-POP is the spectrum bandwidth in Megahertz times the population living in the area covered by the license.  A normal EBS license is 22.5 MHz.  In an example GSA of 100,000 population, the total MHz-POP would be 2,250,000.  Bidders would set the price of the lease during the auction depending on location and demand.  If a historical price of $0.04/MHz-POP is used in this assumption, the term value of the lease will be $108,000.  Offers may be higher or lower.

Once the spectrum lease auction is complete, winning bidders will be matched with license holders.  The two parties will commence to negotiate a lease satisfactory for both parties.  Negotiables of the lease may be term in years, payment terms, inflation correction, initial date of lease, right of first refusal and other variables. Once the lease is consummated, the lessee will make an upfront payment to Select Spectrum from which commissions will be deducted.  The balance will then be paid to the EBS license holder.

Leasing spectrum licenses is another method of obtaining rights to licensed spectrum.  The lease is basically financed by the license holder, who agrees to accept monthly or annual payments from the lessee in return for the rights to use the spectrum license for a period of time.  While most auctions require large amounts of capital to compete for the purchase of large geographical blocks of spectrum, the lease auction will be attractive to competitive local and regional broadband providers.  This may be due to the smaller size of GSA’s, license importance to  local providers versus nationwide providers, lower cost of entry, automatic inherent lease financing, higher power limits and less interference.

Historically, nationwide providers  have deployed first in areas with high population densities. Often times these nationwide providers ignore the rural low density areas of the country, even though they have purchased the licenses.  This EBS lease auction process will attract a large contingent of rural wireless broadband providers called WISPs.  WISP operations cover a major portion of the rural and suburban areas of the United States using primarily unlicensed spectrum.  These operators are normally smaller, local or regional operations.  The oldest WISP operation started in the late 1990’s and the largest operator operates in portions of 16 states.  Therefore, a WISP operator in rural Kansas, may value a local EBS license higher than a nationwide provider.  Either way, the more bidders participating in the auction, the more accurate the spectrum lease valuations will be for the license holder.

For more information, contact a bidder’s agent:

Rick Harnish at rharnish@fibertothefarm.com or call 260-307-4000. 

Liz Creekmore at liz@intelpath.com or call 312-841-9188

EBS License Holders can contact Robert Finch at rfinch@selectspectrum.comor call 703-635-2686.