5G race spurs $66B bidding war
A bidding war for airwaves that power 5G service has already hit a record-setting $66 billion as of Tuesday evening and could hit $72 billion for the U.S. government before Christmas.
Why it matters: Wireless carriers, cable companies and others need these airwaves to deliver 5G service, and the U.S. is behind other countries in doling them out.
What's happening: Companies like AT&T and Verizon are competing in a Federal Communications Commission auction for airwave licenses in a "sweet spot" (known as the C-band) of the spectrum that will allow them to provide 5G speeds to consumers.
- "There’s a lot of pent-up demand," New Street Research analyst Philip Burnett said. "The carriers have been waiting for years now to get their hands on this spectrum, and they realize what’s on the line, so they’re willing to spend."
- Capital is cheap right now, where an extra $10 billion of bids costs $500 million to finance, which large operators can afford, noted Walter Piecyk, partner at analyst firm LightShed.
So far, companies have bid $66 billion and will pay an additional $13 billion to get quick access to the licenses. The bulk of that money will go to the U.S. Treasury.
- Bidding in the current auction began earlier this month and is beginning to slow.
- "At some point the aggregate dollars each of these carriers will owe is going to be more than they can possibly raise without having their credit ratings downgraded," Burnett said.
Flashback: The previous record-holder was an airwaves auction in 2015 that generated nearly $45 billion in bids.
What's next: Because the airwaves are already being used for other services, the earliest the winning bidders will be able to deploy them for 5G will be at the end of 2021.
- That's only in the biggest cities in the U.S., Burnett noted. For everyone else, it will likely be 2023 before these airwaves are used for 5G.
Go deeper: Watch Axios' "Get Smart" videos to learn more about 5G