Following 14 rounds of bidding during the Federal Communications Commission’s 700 MHz spectrum auction, also known as Auction 73, pre-auction forecasts of between $10 billion and $15 billion in total winning bids are spot on. The auction of 1,099 licenses surpassed the $10 billion mark following round 14, boosted by nearly $1 billion in new bids during the early-morning round 13 and just over $500 million in new bids during round 14.
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The day’s opening round was juiced by a new bid for the eight C-Block license package covering the 50 states, which pushed the potential winning bid to nearly $4.3 billion, just short of the $4.6 billion needed to hit the C-Block’s open-access provision. However, the price stood pat during round 14, with the next minimum bid set at just under $4.8 billion.
Despite not being able to see who is actually bidding on the spectrum due to the FCC’s blind bidding process, analysts have commented that the C-Block package has likely become a high-stakes tussle between Internet giant Google Inc., which had said pre-auction that it would bid at least $4.6 billion for C-Block spectrum, and wireless giant Verizon Wireless.
Analyst firm Stifel Nicolaus, which has been following the auction closely, noted in a report after round 12 that as the C-Block bidding neared the open-access trigger, it was becoming more difficult to discern bidders and their intentions.
“That package bidder could of course be any of the large bidders,” the firm wrote. “But unless Google has abruptly shifted course over the last week, it is likely that it entered the auction and has been bidding up the package license . with an eye on eventually triggering the open-access condition. If that is the case, and if Google is the only bidder at this point, it has also become more difficult for any carrier, even Verizon Wireless, to be able to assemble enough bidding eligibility in a single round to allow it to bid on the package license. This would mean that Google would have to face a choice of whether to continue to bid on the package high enough to meet the $4.6 billion reserve price, thereby obtaining the spectrum . or whether instead to stop bidding short of the reserve price.”
Stifel Nicolaus added that by stopping short of the reserve, and assuming no one comes along to push the price past the $4.6 billion mark, the FCC would be forced to divide the C Block into two smaller licenses and without the open-access conditions for a re-auction.
On a per megahertz per potential customer covered basis, the B-Block licenses continue to gather the most interest. The B Block covering the Norfolk-Virginia Beach, Va./N.C., market picked up only a single bid during the last two rounds, but stood at an auction high $2.85 per MHz/pop according to Optimal Markets Inc. The B Block covering the Chicago area was a close second at $2.81 per MHz/pop, with the B Block covering the New York City area coming in at No. 3 at $2.15 per MHz/pop. (These numbers leave out licenses covering the Gulf of Mexico, which don’t include any potential customers covered but are often used to cover oil rigs operating in the area.)
What has not changed is the lack of interest in the national commercial-public safety D-Block license, which failed to pick up any new bids this morning and remains at the $472 million bid placed during the opening round. Sentiment is growing that the license is unlikely to receive any additional bids and that the FCC will be forced to hold a subsequent auction for the spectrum that will include a lower reserve price and possible easing of requirements for that spectrum.
By mid-day 1,013 licenses had received a potential winning bid. Two more rounds were scheduled for this afternoon.
