The Most Undervalued Asset In Critical Infrastructure

Christopher Guttman-McCabe leads Anterix‘s regulatory and spectrum agenda, advancing private broadband for critical infrastructure.

gettyOver the past 18 months, tens of billions of dollars in announced transactions have involved spectrum licenses. Yet most conversations about spectrum focus on what it costs rather than what it enables. ​That’s a mistake.

Spectrum is no longer simply a communications input. For more and more organizations, it’s become a strategic infrastructure asset that shapes resilience, operational control and long-term flexibility.

I’ve watched this conversation change dramatically. What has not changed is that we still tend to think about spectrum too narrowly. We debate auction results, compare license valuations and measure holdings in megahertz. Those metrics tell us surprisingly little about what spectrum is actually worth to the organizations that depend on it.

Spectrum has monetary value. It also has strategic value. Owning spectrum determines how much control an organization has over its own communications and, increasingly, over its own operations.

The buyers are not all looking for the same thing. They are looking at spectrum through different lenses and for different applications. What they have in common is that they are placing a very high value on access to a resource that cannot simply be manufactured when demand increases.

There is a tendency to treat spectrum as though a megahertz is a megahertz. It is not.

Low-band spectrum is a good example. Below 1 GHz, signals travel farther and penetrate buildings, foliage and other obstacles more effectively than higher-frequency spectrum. That matters when you are trying to connect equipment spread across a large geographic area, reach into buildings or maintain connectivity in environments where coverage is difficult.

You cannot simply substitute another frequency and get the same result. The physics do not work that way.

There are only so many opportunities to acquire meaningful amounts of high-quality low-band spectrum. Once those opportunities are gone, creating more spectrum with the same characteristics is not an option. ​Wireless operators need spectrum for terrestrial networks. Satellite companies are pursuing direct-to-device connectivity and looking at how terrestrial and satellite networks can work together. Our company and Lynk Global, for example, are testing satellite direct-to-device service on our 900 MHz spectrum under an FCC experimental license. Beginning with Ameren in 2020, utilities are using 900 MHz to connect more devices, automating more of the grid and asking their communications networks to do more.

What I find most interesting about the transactions we have seen recently is not the dollar value; it’s the diversity of buyers and what they are trying to accomplish.

A satellite company may see terrestrial spectrum as part of a broader connectivity architecture. A critical infrastructure operator may value spectrum because it can provide control over a network that supports operations where communications cannot be treated as an afterthought. Those are very different investment decisions, but they point to the same market reality.

A spectrum auction can tell you what the market was willing to pay under a particular set of circumstances. A strategic acquisition can tell you something different.

For an infrastructure operator, the value of spectrum may have very little to do with whether it could be sold tomorrow. It may be reflected in what the network enables every day.

Consider what is happening on the electric grid. Utilities are deploying intelligent devices, sensors and automated equipment across increasingly distributed networks. The grid is becoming more digital and more dependent on the ability to move information quickly and reliably.

Take a power line that breaks and begins to fall. Sensors can detect the break and de-energize the line in about a second, before it reaches the ground. In dry country, in high wind, that second is the difference between an outage and a wildfire. But the detection only matters if the information reaches the system quickly and reliably enough to act on.

The value of the spectrum supporting that connection is not captured by the price of the license. It is reflected in the capability of the network: better visibility, faster response, greater automation and more control over critical operations.

For any infrastructure provider, spectrum is not simply a communications asset. It becomes part of the infrastructure itself.

There is another part of spectrum’s strategic value that is harder to quantify: optionality.

Consider satellite connectivity. Direct-to-device technology is creating the possibility of satellite connectivity extending the reach of terrestrial networks and providing another layer of coverage and resilience. For a critical infrastructure operator, terrestrial connectivity could remain the primary network while satellite provides an additional layer when and where it is needed. Owning spectrum can create those options. It can allow an organization to build a network today while preserving flexibility around how that network evolves tomorrow.

It is also one reason spectrum is different from many other infrastructure assets. A physical asset can depreciate as it ages. Spectrum does not wear out. Its usefulness can increase as more devices, applications and technologies depend on connectivity.

There is no single formula that captures the value of spectrum. Comparable transactions matter. Auctions matter. But they need to be considered alongside the characteristics of the spectrum itself, its scarcity, what it enables and the alternatives available to the potential user.

Strategic value belongs in that discussion as well.

Demand is expanding across terrestrial wireless, satellite and critical infrastructure, while the supply of high-quality low-band spectrum remains limited. As more industries depend on connectivity, the more consequential that scarcity becomes. Blocks of high-quality, low-band spectrum rarely become available. If you pass on one, you are not deferring the decision. Likely you are making it permanently.

​For organizations that depend on spectrum, value is measured not by what it can be sold for but by what it enables. That is a different way of thinking about an asset that has traditionally been measured primarily in megahertz. Spectrum is finite. The demand for what it enables is not.

Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives. Do I qualify?