Citizens Broadband Radio Service Auction Presents New Options for Rural Operators
Acquiring an affordable CBRS spectrum license could be an attractive investment
DENVER (June 24, 2020) — The upcoming Citizens Broadband Radio Service (CBRS) auction will enable new market entrants, including smaller and rural operators, to build carrier-grade networks at very attractive costs. This could lead to a more fragmented industry with hundreds of new networks.
A new report from CoBank’s Knowledge Exchange, examines how the CBRS band could change the broadband industry and what factors rural operators should consider when developing their spectrum strategy.
“The shared nature of the CBRS band gives operators the option of buying licensed spectrum or using unlicensed spectrum,” said Jeff Johnston, CoBank’s lead communications economist. “Either option will include paying fees to and relying on a Spectrum Access System (SAS) administrator, and operators should carefully evaluate the long-term implications when negotiating these agreements.”
The Federal Communications Commission (FCC) will start its highly anticipated CBRS auction for the licensed portion of the band on July 23. Unlike previous auctions, the FCC is offering spectrum licenses at the county level versus its traditional approach of using partial economic areas (PEA), which are much larger.
The July auction includes 22,631 Priority Access Licenses (PAL) in 3,233 service areas, or counties. The auction is expected to be highly competitive in urban and suburban markets, but county-level licenses may offer cost-effective opportunities for smaller operators to acquire spectrum in rural markets.
A key consideration for rural operators will be whether to buy a PAL or use the unlicensed portion of the band. Buying spectrum ties up capital, which is an important consideration for some rural operators. Exclusively using unlicensed spectrum, which comes with no up-front acquisition costs, is arguably the right approach in rural America where radio frequency interference concerns will be less of an issue.
However, operators that purchase and own a PAL will be given priority access to the CBRS band over unlicensed users, which results in better network performance that can generate higher fees. Licensed-based networks could also generate wholesale roaming revenue.
All CBRS users will need to contract with a SAS administrator and should carefully consider how these contracts are structured to reduce the administrator’s leverage when renegotiating the contract. Operators should be wary of deals that are cheap up front but eventually exploit their potential vulnerability.
“We expect bidding interest in the CBRS auction to be high,” said Johnston. “Given that market entry barriers are expected to come down, incumbent broadband operators could see increased competition from new business models.”
Watch a video synopsis and read the report, As CBRS Auction Shapes Broadband Landscape, Should Rural Operators Make a Bid?, at cobank.com.
CoBank is a $158 billion cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving more than 70,000 farmers, ranchers and other rural borrowers in 23 states around the country.
CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture, rural infrastructure and rural communities. Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and also maintains an international representative office in Singapore.