Wireless Spectrum

What is Licensed Spectrum?

Wireless communication is critical to countless everyday things that we take for granted. Some, like Wi-Fi, ham radio, garage door openers, etc. utilize what are called unlicensed frequencies. These bands are set-aside for anyone to use for approved, low power applications. However, because radio waves from multiple nearby transmitters can cause interference and prevent clear reception, many wireless systems require dedicated channels. Commercial operators including television and radio stations, mobile phone companies, etc. acquire protection from interference in the form of FCC spectrum licenses which provide for exclusive use and protection from interference in specific areas. These spectrum licenses are thus valuable assets, which the FCC allows to be bought and sold, leased, partitioned, disaggregated, etc. by license holders in what is referred to as the secondary market for spectrum.

Value of Licenses

Provide the right to use frequencies throughout a given area such as a group of counties. Area licenses are more valuable than licenses that only allow communications between two points using focused radio signals due to increased flexibility and frequency re-use.

  1. Geography / Terrain / Propagation

    The ability to propagate well, or how effective a signal can be transmitted across certain frequencies, affects the value of the spectrum. Typically, the lower the frequency is, the better the quality of propagation – and thus the more valuable the spectrum. Additionally, increased signal range means fewer tower sites are requires, resulting in overall network cost-savings.

  2. Population Volume and Density

    A spectrum license covering New York City is, all else being equal, worth far more than a license covering Elko, NV. A TV station in New York could generate far more ad revenue, and a mobile wireless company there would be able to serve far more customers.

  3. Band Size

    The bandwidth of spectrum measures how “wide” a given channel or band is. Wider bands, denoted by the kHz or MHz available, can carry more information and are often worth more in total than narrower bands.

  4. Regulations

    FCC regulations under Title 47 of the Code of Federal Regulations often carry a significant impact on the value of licensed spectrum, as the rules directly or indirectly influence a number of key factors for spectrum deployment, and thus license value. Aspects such as power limits, antenna heights, interference protection/exclusivity in use, license size and acquisition means (FCC application, auction process, etc.), and so on can vary significantly between bands.

  5. Supply / Demand

    Depending on the competitive situation, license values can be lower or higher, all else being equal. If the market area in question has multiple licensed spectrum options/sellers, then the value will be lower, all else being equal, and vice versa. Likewise, an overall increase or decrease in the demand for licensed spectrum in general, or for a specific licensed band, will drive values upwards or downward. Such trends can be seen on a nationwide basis and/or a per market basis.

  6. Ecosystem Quality

    Since licensed spectrum is a means to an end (deploying applications for end-users or internal use) the quality of equipment options (radios, antennas, etc.) is a critical consideration for parties who are seeking to purchase licensed spectrum rights. A poor ecosystem is likely to result in lower demand, whereas a robust ecosystem tends to increase demand. Industry standards, such as 3GPP for LTE, can provide buyers with access to a global ecosystem, driving equipment costs to be lower and widening the pool of prospective users and buyers.

Spectrum Prices

Spectrum auctions, while infrequent, provide good examples of spectrum prices. Secondary market transactions also provide useful spectrum value information. Generally, spectrum license prices are measured on a $ / MHz-POP basis, where the numerator is the total value of a license and the denominator is the product of spectrum bandwidth as measured in total megahertz (MHz) and the population (POPs) living in the covered areas, per U.S. Census estimates. Select Spectrum also maintains a database of spectrum value information and provides valuation estimates and conducts details appraisals for clients as one of its service offerings.