Business | Telecoms in America

On the airwaves

An auction of wireless spectrum has led to a feeding frenzy

|SAN FRANCISCO

TIMES are getting tougher for America’s mobile operators as they battle one another for business. On December 8th Verizon, which dominates the market together with AT&T, gave warning that its profits were being squeezed as it rolls out discounts to entice customers away from rivals. Telecoms firms are scrapping over something else too: the wireless spectrum needed to carry voice and data services.

Every so often, America’s Federal Communications Commission puts up airwaves for auction. The latest sale began on November 13th. Before it started, analysts took stabs at guessing how high the bidding might go, with bullish estimates coming in at $22 billion. But that amount was blown past in just a few days and bids now total a whopping $43 billion (see chart).

What explains this appetite for airwaves? Part of the answer is that the last big spectrum auction in America took place in 2008, at a time when smartphones were only just taking off. Bids totalled almost $20 billion. Since then, smartphones and tablet computers have proliferated, putting pressure on existing airwaves. “Carriers have consistently underestimated the demands on their data networks,” says Spencer Kurn of New Street Research.

Then there is DISH, a satellite-TV firm that also owns a chunk of wireless spectrum. Its boss, Charlie Ergen, has long argued that investors have undervalued its airwaves. Analysts think DISH, which is involved in the bidding, has been doing its best to drive up prices so its own holdings are worth more. Mr Ergen’s tactics appear to be working: DISH’s share price has risen since the auction began.

This article appeared in the Business section of the print edition under the headline "On the airwaves"

On trial: What has gone wrong with policing in America

From the December 13th 2014 edition

Discover stories from this section and more in the list of contents

Explore the edition

Discover more

Making accounting sexy again

The profession needs a makeover to attract newcomers

A marketing victory for Nike is a business win for Adidas

The contest of the sportswear giants heats up


The pros and cons of corporate uniforms

A quarter of the American workforce wears one. Why?