Before we get into the potential for the secondary market, a little CBRS history. The original proposal in 2015 was that the PALs would be awarded on a census tract basis – this meant that in major urban centers, it would be possible to buy a license for a city block or so. There are more than 11.5 million census tracks in the U.S. and seven PALs to be auctions per tract, so this would obviously require a very flexible auctioning system. The FCC stated at the time that they imagined an ‘eBay-like’ auction process.
One downside of the census tract approach is the sheer number of licenses required for an operator to cover a meaningful area. For example, if one of the major operators wanted to get PALs for an MSA, a large number of licenses would have been needed. Following pressure on the FCC, the final rules stipulated that the PALs would be awarded on a county level – there are 3,141 counties and county equivalents in the U.S. So with seven PALs per county, this results in 21,987 PALs being up for grabs.
But while the county level PALs are better for the large operators or larger bidders, they are unworkable for the smaller investor. Consider a CRE investor in downtown Dallas who owns half a dozen large buildings – under the original proposal, the property owner could have bid on a few PALs to cover the census blocks their building are in. But now, that property owner will have to bid on a PAL for Dallas county, which is likely to be far more expensive and cover a lot of area that the property manager does not need.
Enter the secondary market. This gives the potential for the owner of a PAL to lease access to that PAL to other users and even multiple users in the same county. Consider the following ideas:
- An investor buys PALs in major metro markets and then leases access to the PALs to enterprises, CRE property managers, hospitals, universities, schools, etc. If the PALs are used inside buildings, there will be minimal interference within the PAL. In the past, the investor would have bought a licenses to later sell to one of the major MNOs. Now the business model is slightly different – realize the value of the PAL by leasing to different entities.
- One of the large public cloud operators or hyperscalers would buy one or two PALs in every county across the U.S. thereby getting guaranteed nationwide access. Enterprise customers of that public cloud could then get access for use inside their buildings as long as they remain customers of the cloud provider. Imagine AWS doing this – they buy PAls across the country and then let AWS enterprise customers have access – all the enterprise would have to do is install a CBRS network in their building and then use the AWS PAL for guaranteed service.
- A rural telephone operator,, telephone cooperative or utility could do something similar. They could acquire a PAL in their county and use the license for outdoor service. But they could also have secondary tenants who use the PAL indoors.
There are many options – these are just a few. And I am sure smart people will come up with some creative ideas. We will be discussing the CBRA PAL secondary market and its potential at our CBRS PAL Auction Workshop in Washington DC on March 11th (www.CBRSauction.info). Join us!