This article is the third and final in a three-part series examining the outcome of the landmark CBRS auction (105). Throughout the series, there is a focus on the winnings and ambitions of wireless carriers, cable MSOs and utility providers.
In the CBRS auction, multiple utilities competed alongside wireless operators and others to secure licensed mid-band spectrum in the 3.5GHz band. This unprecedented diversity of bidders is, perhaps, the best example yet of how shared spectrum is transforming the industry and toppling barriers to market entry for newcomers.
The need for highly secure and reliable communications infrastructure is not a new precedent for utilities. In fact, many have operated an effective “third grid” for years. What is new, however, is the changing nature of this need, which now involves a transition to wireless networks with capacity measured in hundreds of megabits per second.
Armed with a CBRS-enabled “smart grid”, utilities can combat faults in real-time through remote monitoring and control, as well as supporting teams in the field with connected tablets and voice and video services. New revenue opportunities and cost efficiencies are emerging too, buoyed by the prospect of selling services to enable consumers to better analyse and optimise energy consumption.
Quantifying Utility participation in Auction 105.
Eleven utilities, responsible for the provision of services such as energy and water, entered Auction 105. Ten of these were successful in obtaining Priority Access Licenses (PALs), which consist of a 10MHz channel within the 3.5GHz band (3550-3650MHz), each renewable after a ten-year period.
In total, the ten utilities forked out more than $174 million to acquire 375 PALs across 150 counties. Importantly, most analysts viewed these results as representing good value for the bidders since they managed to acquire spectrum in counties comprising greater than 10% of the US population while only accounting for 3.8% of the gross auction proceeds (which reached $4.585 billion).
Despite this, due in part to the geographically-expansive and urban nature of utility bidding, the weighted average cost per MHz per head of population (or MHz-pop) at $0.3615 was higher relative to the overall country average of $0.217/MHz-pop. It should be considered, however, that the 10MHz slices gained by utilities are proportionately more significant than they are for wireless carriers (who already have expansive holdings).
Southern California Edison (or SCE) emerged as the largest bidder in terms of its gross spend, shelling out almost $119 million for twenty PALs across fifteen counties. The utility operates energy generation, distribution and transmission networks across Central, Coastal and Southern California to provide electricity to ~14 million people.
However, it was Alabama Power that won the largest number of PALs, obtaining 271 across 103 counties in the states of Alabama and Georgia. With ~1.4 million customers, it is the second largest subsidiary of Southern Company, one of the largest utilities in the country in terms of customer base.
San Diego Gas & Electric (or SDG&E) spent the greatest amount of money in terms of $ per MHz-pop at $0.5748 but secured only three PALs across two counties. Serving San Diego County and southern Orange County, the utility has dabbled with private LTE in the past and applied to the FCC for a special temporary authority (STA) in 2019 to assess whether 10 or 20MHz time division duplex (TDD) channels would provide the required coverage, capacity and latency to support mission-critical use cases.
Surprisingly, Exelon did not bid for any licenses despite entering the auction. This is significant because it is the largest regulated utility in the United States in terms of customer base (~10 million) and power generation (>35,000 watts of owned capacity). If it had participated with the intention of obtaining one license for coverage across its six operating subsidiaries, the utility would have expected to pay in excess of $80 million.
An Overview of the Use Cases and Applications enabled by CBRS.
By virtue of the fact that the CBRS band provides orders of magnitude more capacity than that available with low-band spectrum, which has been mostly limited to predictive maintenance and fault protection systems, it is an ideal medium for utilities to develop private LTE networks (with 3GPP Band 48) that serve higher bitrate traffic applications.
In effect, PAL-based spectrum can become an anchor on which the General Authorized Access (GAA) tier can be added as required within the same network architecture. On its own, the GAA tier is unsuitable for utilities because of the need to maximise reliability across their footprint. The use of both PALs and GAA could, therefore, augment the value of the former.
As a cellular technology, private LTE networks in the CBRS band are suited to applications which are both static and mobile in nature, unlike other technologies such as Wi-Fi. In the field, mobility-focused applications including hardened tablets, two-way radios and vehicle tracking could support maintenance crews.
Static applications, on the other hand, could take advantage of the CBRS band as a medium for low latency backhaul to complement existing fibre and microwave links. This may serve supervisory control and data acquisition (SCADA) systems, distribution automation (DA), advanced metering infrastructure (AMI) and distributed energy resources (DERs).
In addition, remote monitoring with cameras is a key use case for the band, exploiting the large amount of bandwidth available to investigate problems in power plants and oil and gas refineries. This negates the need to suspend operations when a person is needed to diagnose the issue.
Other use cases include gunshot detection devices, parking monitoring, street lighting, transmission tower lights and environmental conditions monitoring.
The Opportunity to realise Cost Efficiencies and Revenue Enhancement.
Private LTE with CBRS may enable significant cost efficiencies for utilities through reducing the number of disparate wireless networks that need to be managed. At present, some utilities are managing more than two dozen separate systems for multiple wireless networks and many are approaching obsolescence.
It could also pave the way for the generation of new revenue streams. There is an opportunity to leverage the existing customer base to upsell new services such as fixed wireless access (FWA) broadband and to provide customers with enhanced insights into energy usage with smart metering.
In particular, the prospect of a utility company deploying, operating and selling broadband in the CBRS band is a major development and one that could reduce the digital divide by expanding Internet access to some of the most rural and underserved communities in America. For the utility, it could also improve long-term customer retention.
Separately, some in the industry have also pointed to an opportunity in the form of infrastructure sharing. For instance, utilities could provide access to their wireless network to other non-competing utilities across a common PAL area. This strategy could aid them to spread the cost of deployment across a larger number of funding sources, while also expanding the number of addressable use cases.
Conclusion: CBRS bolsters the “third grid”.
The challenging macroeconomic outlook in a world plagued by COVID-19 has posed a problem for utilities with declining revenues. But, in spite of this short-term blip, long-term confidence in the sector remains robust.
Undoubtedly, the upfront cost of constructing a private LTE network in the CBRS band will be significant, yet it didn’t deter the ten successful bidders. Each of these utilities is now able to marry prime mid-band allocations with existing sub-1GHz spectrum to radically augment capacity while also maintaining the foundational pillars of reliability and security.
In doing so, they possess the keys to unlock an array of new use cases and applications, enabling operational and cost efficiencies and paving a path for revenue generation.