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FCC Incentive Auction Creates Opportunity

|Includes: Sprint Corporation (S), T, TMUS, VZ
  • Incentive Auction offers a cost effective way to reach both urban and rural telecom customers
  • It reallocates resources based on demand to increase efficiency
  • Rural areas will have more options with higher quality communications while urban areas will enjoy greater building penetration
  • Unlicensed spectrum will also be issued

Today the incentive auction for the 600 MHz Band of wireless spectrum begins. This repackaging of broadcast television spectrum compliments a companies existing bandwidth. Verizon (NYSE:VZ), At&t (NYSE:T), T-Mobile (NASDAQ:TMUS), and Sprint (NYSE:S) will all be participating to grab a piece. It's called a "prize" because of the unique properties of this particular piece of spectrum. The wave length that the signal travels on is shorter, travels further, allowing for fewer base stations and greater signal reception inside of buildings. The increase in efficiency and value also adds quality and choice to those living in rural communities.

There was a similar auction held early in 2015 for a higher frequency range. The AWS-3 auction raised a gross of 44,899,451,600 with At&t as the largest bidder at 18,189,285,000. Verizon followed with 10,430,017,000 and T-Mobile added another 1,774,023,000. Sprint sat out that auction having already deployed sufficient coverage using their Wi-Max network as a backbone for current LTE technology. The auction, structured as the incentive auction, lasted for 45 days. The FCC uses a system of bidding where the auction continues as long as there is demand. When the AWS-3 auction began the stocks trended downward. During the days following the completion there was an uptick that brought them back to levels that were seen before the auction began.

Of the major carriers Verizon is in the strongest market position with At&t not far behind in terms of customer base. T-Mobile and Sprint both have loyal customers in markets where they dominate. This auction will determine where the services for the next generation 5G are strongest for each carrier. With the large capital outlay and massive bandwidth requirements that will come out of this industry in the next few years. The company with the most spectrum wins.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.