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September 2014. The Value Proposition for Spectrum Acquisition by Utilities. 1. Components of spectrum value. Inherent asset value & asset appreciation Security Communications reliability Competitive lever. Inherent asset value.

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Presentation Transcript
components of spectrum value
Components of spectrum value
  • Inherent asset value & asset appreciation
  • Security
  • Communications reliability
  • Competitive lever
inherent asset value
Inherent asset value
  • Spectrum is an asset, and can be capitalized just like poles and wires.
    • Involve your accounting leadership early and often in the process; they need some education about this unusual asset.
  • Valuation is....difficult. There is no efficient market for spectrum. Each transaction, each situation, is unique.
  • Get assistance
    • experienced spectrum broker and
    • a technical advisor like UTC spectrum services.
  • Valuation of the spectrum asset is not just about frequency. It's also about the ecosystem around that spectrum.
    • Buyers & sellers
    • Neighbors
    • Equipment manufacturers and other users
inherent value 2 technical considerations
Inherent Value 2 - Technical Considerations
  • Management needs to understand the technical trade offs at a high level. Like real estate, it‘s all about location, location, location (frequency).
  • Higher frequencies
    • Have more information carrying capacity
    • Provide less coverage/range, so you need more towers
    • Can use smaller antennae
  • Lower frequencies
    • Can have large antennae
    • Provide better coverage/range
    • Have less information carrying capacity
  • Once again, get assistance.
asset appreciation
Asset appreciation
  • Unlike most physical assets, spectrum will hold its value and/or appreciate over time
  • The biggest factors in appreciation are
    • Scarcity
    • The ecosystem of stakeholders
    • FCC operating rules (zoning) of your spectrum and adjacent blocks
  • ICS cybersecurity has become a very visible topic – a topic with some leverage
  • Private communications links (based on private spectrum) are arguably more secure
  • Public carrier communications systems are a target – smaller-scale private systems are generally not
  • Utilities can demonstrate compliance and security controls on a private system
communications reliability
Communications reliability
  • The traditional argument for private utility spectrum is communications reliability and integrity.
    • A built-for-purpose communication system can be stronger than a public, one-size-fits-all system.
    • Utilities are low on the priority list for public communications usage during emergencies.
  • Communication reliability directly impacts workforce safety.
  • Hurricane Sandy illustrated how public communications services can be down just when first responders need them the most
competitive lever
Competitive lever
  • Without some spectrum rights, utilities have no leverage on public communication carriers’ cost.
  • Private spectrum and the system you build can be a platform to provide telemetry and communication services to other utility types within your service area (e.g. water, coops, small munis...).
  • Spectrum rights across geographies can assist in M&A activities.
policy and other considerations
Policy and other considerations
  • The FCC controls the market.
    • The FCC exists to manage US spectrum efficiently.
    • Dealing with the FCC is a long and complicated process. The UTC staff can assist greatly.
    • Their largest stakeholders (aside from the public) are the communications carriers. Everyone else is a distant, distant third.
  • Broadband spectrum is highly desired by communications carriers, so price is often out of reach for utility companies.
  • Cybersecurity concerns for the industrial control system will add some weight to arguments for dedicated utility spectrum, but...still not a slam dunk.