YOU ARE AT:PolicyFCC 600 MHz incentive auction stage 2 start set for Sept. 13

FCC 600 MHz incentive auction stage 2 start set for Sept. 13

A second stage for the FCC 600 MHz incentive auction proceedings will begin with reverse auction targeting to clear 90 megahertz for forward auction bidders

The Federal Communications Commission looks set to regroup from the sudden end of the first stage of its 600 MHz incentive auction, scheduling stage two to begin Sept. 13 with a new round of reverse-bidding by television broadcasters.

The government agency said the new stage of activity will look to clear 114 megahertz of total spectrum in the 600 MHz band, with 90 megahertz to be set aside for interested bidders in the forward auction process. The licenses will be grouped into a maximum of nine licenses per partial economic area, with each license containing 10 megahertz of spectrum.

Should the reverse auction process go as planned, the forward auction will contain 3,688 “category one” license blocks with up to 15% impairment and five “category two” license blocks with between 15% and 50% impairment. The FCC did note 99.8% of the category one licenses will have no impairment.

The total amount of spectrum to be cleared in stage two is 12 megahertz less than what was cleared for more than $86 billion in stage one, with clean spectrum to be included in the forward auction process cut from 100 megahertz in stage one that witnessed bidding hit the wall just north of $23 billion.

The first reverse auction stage took one month, with television broadcasters working through 52 rounds of bidding. The FCC then took about 45 days to “repackage” the spectrum offered up by broadcasters and run through mock drafts and tutorials with forward auction participants before beginning the forward auction process.

The FCC looks set for a quicker turnaround this time, noting the forward auction process of the second stage will begin just one day after the reverse auction ends.

FCC Chairman Tom Wheeler had previously acknowledged the government agency may need to conduct further reverse auction stages should forward auction bidding not meet clearing targets.

“The auction is a market-based mechanism for matching supply with demand,” Wheeler explained. “Until the forward bidding concludes, we will not know whether the demand meets the large supply offered by broadcasters. Depending upon that response, it’s possible that we would need to move to additional stages to find the level where demand meets supply. The commission intentionally designed the auction to account for the possibility that supply and demand might not match at the initial clearing target. It’s something we planned for and we’re fully prepared to implement if the need arises.”

Analysts have been predicting it’s likely the FCC will need to move to a third auction stage, which would further reduce total spectrum available for commercial services down to 80 megahertz, or even to a fourth stage with just 70 megahertz of spectrum made available before there is alignment on what broadcasters want in terms of compensation for the spectrum and what telecom operators are willing to offer.

Dan Hays, principal at PwC’s Strategy& consulting group, noted television broadcasters will now need to reevaluate the valuation of their spectrum holdings in light of the lower than expected response from mobile telecom industry bidders, which could increase competition.

“The ball is now back in the court of TV broadcasters, who will need to decide whether to accept lower prices for their spectrum or bet on future opportunities to cash in on their airwaves,” Hays noted. “We anticipate that many will choose the certainty of the auction and roll the dice in the second stage starting in the coming weeks. … A halving of the total spectrum clearing cost in a second stage of the reverse auction, due to increased competition among broadcasters participating, would not be at all out of the question.”

Berge Ayvazian, senior analyst at Wireless 20/20, indicated it would take some extraordinary diplomacy on behalf of the FCC to find some way to bridge the gap between what it appears mobile telecom operators are willing to spend and what it appears television broadcasters want for their spectrum holdings. Ayvazian noted telecom operators might not be as gung-ho for low-band spectrum in light of the future focus of “5G” services to use higher-band spectrum to support increased capacity needs and not broader coverage.

In fact, just prior to the FCC conducting the forward auction process, it released details on it’s Spectrum Frontiers proposal that is to include opening up nearly 11 gigahertz of spectrum above the 24 GHz band in support of mobile telecom services.

One potential benefit from the quick close of stage-one activity is that the auction could see an expedited conclusion. Many had expected the auction at its stage-one pace to last well into next year as the FCC moved through various stage proceedings. Walter Piecyk from BTIG said it was possible for the auction to wrap up by year-end.

Bored? Why not follow me on Twitter

Photo copyright: abluecup / 123RF Stock Photo

ABOUT AUTHOR