The FCC today announced it will be able to offer a whopping 126 MHz, or 10 paired blocks, of licensed spectrum on a near-nationwide basis in the forward portion of its 600 MHz incentive auction. That's a huge victory for FCC Chairman Tom Wheeler, and it potentially creates an opening for a new wireless carrier to launch in the United States.



To be clear, there is a very low possibility that Comcast, Dish Network, Rama, Columbia Capital or another one of the 104 auction applicants will actually be able to buy enough 600 MHz licenses to build a nationwide network to challenge incumbents like T-Mobile US, Sprint, AT&T and Verizon. But based on the amount of spectrum being made available in the auction, and that spectrum's propagation characteristics -- coupled with regulatory changes to the backhaul market and new technological developments in Wi-Fi and the unlicensed spectrum area -- it's something that I'm betting at least a few deep-pocketed entrepreneurs are considering.



But let me explain: The FCC's 600 MHz incentive auction is unique. It essentially creates an eBay between the TV broadcasters that don't want their spectrum and the wireless carriers and others that want more spectrum. But the auction will only work if enough bidders come to the table to make it worthwhile for TV broadcasters to give up their spectrum holdings.

The spectrum itself in the auction is also unique. It is the lowest-band spectrum that the FCC has ever made available for wireless carriers: 600 MHz airwaves will be able to travel further and penetrate farther into buildings that 700 MHz, 850 MHz, 1900 MHz or any other band currently in use by the nation's cellular operators. What that means is that a network operator will need far fewer 600 MHz cellular towers to cover the same geography as they would with higher-band spectrum. For example, T-Mobile's CFO said last year that one 700 MHz tower could cover the same geographic area as five 1700 MHz towers. And 600 MHz spectrum would be able to cover an even greater area than 700 MHz spectrum.

Moreover, any 600 MHz auction winner may also be able to benefit from two key developments in the industry: changes to the backhaul market, and a burgeoning Wi-Fi sector.

First, on the backhaul market, the FCC during its monthly meeting yesterday took further steps to make it easier for carriers like Sprint and T-Mobile to connect their cellular towers to the nation's core Internet network (this is what's called "backhaul"). The FCC calls such connections to the nation's core Internet network the "business data services" market, but it's also commonly referred to as "special access." Whatever its name, it basically refers to the prices that companies like T-Mobile (or those that don't own big chunks of the nation's core fiber network) have to pay to companies like Comcast and Verizon (or those that do own chunks of this core network). If the FCC does eventually make it cheaper and easier for companies like T-Mobile to gain access to this core network, then you could assume that 600 MHz incentive auction spectrum winners would be able to provide backhaul to their towers at cheaper prices than they would have paid previously. (Of course, this all assumes that the FCC will indeed be able to lower special access prices, an issue the commission has been investigating seemingly forever.)

Second, and more importantly, any 600 MHz incentive auction spectrum winner will immediately be able to tap into the growing number of public Wi-Fi hotspots spreading across the country. Already a number of companies are using these as a competitive lever: Republic Wireless and Google's Project Fi MVNO are just two that allow users to offload their cellular traffic onto local Wi-Fi networks. And companies like Towerstream, Boingo and others are working to make more of these public Wi-Fi hotspots available to just about anyone, including 600 MHz auction winners.

Access to public Wi-Fi would be especially important to a company like Comcast or Rama that doesn't already own a lot of cellular spectrum. Although 600 MHz signals can cover large distances and penetrate buildings, they can't necessarily transmit a lot of data; higher-band spectrum is much better for that. Moreover, even if Comcast purchased three or four 600 MHz blocks of spectrum, it still wouldn't even come close to the spectrum holdings owned by the market's cellular heavyweights (Verizon, for example, owns more than 116 MHz of spectrum on average in most major markets, stretching across its 700 MHz, 850, MHz, 1700 MHz and 1900 MHz spectrum holdings). Thus, it would be crucial for any new market entrant to supplement their 600 MHz holdings with Wi-Fi or other unlicensed options like the newly freed 3.5 GHz band.

Now, there's one more important stipulation to add: A new 600 MHz market entrant like Rama might not even sell its services to smartphone users. T-Mobile, Verizon, Sprint and others already do that pretty well. Instead, I would bet that Rama, Columbia Capital, Dish or Comcast may instead consider using their 600 MHz holdings to go after the nascent but potentially explosive Internet of Things market. This market promises to connect cars, gas meters, doorbells, smartwatches and all kinds of other objects to the Internet, thereby making them smarter. Companies like Ingenu, Sigfox, Silver Springs Networks and even AT&T and Nokia are working to connect those gadgets to their own networks. And the propagation characteristics of 600 MHz would be well suited to these kinds of IoT connections. Ligado Networks, formerly LightSquared, has already hinted that it might use its own cellular spectrum for IoT applications.

Regardless of the business model, the 126 MHz of 600 MHz spectrum up for grabs in the FCC's incentive auction does create an opportunity for a dark horse to enter the wireless market. Although they will undoubtedly bid on some spectrum, AT&T and Verizon are currently facing a slowdown in their core wireless businesses, and might not spend much on 600 MHz after the excesses of the recent AWS-3 auction. T-Mobile too will definitely supplement its 700 MHz holdings with 600 MHz licenses, but it also will be under pressure from shareholders keen for a return on its investment. And Sprint, for its part, is sitting the auction out.

The spectrum is on the table. Is there a deep-pocketed entrepreneur out there willing to launch a new wireless carrier in the United States? Chamath Palihapitiya? Charlie Ergen? Craig McCaw? Chet Kanojia? Philip Falcone? Anyone? --Mike | @mikeddano