Predictions for the spectrum auction haul top $80B, though process could take 9 months
FORT LAUDERDALE, Fla. – The Federal Communications Commission’s planned 600 MHz incentive auction may not have been the focus of all of the events at this week’s Competitive Carriers Association Annual Convention, but the topic was present on many panel discussions and keynote sessions.
And for good reason. CCA and its members have been very active in lobbying the FCC on potential spectrum rules for licenses that many see as being the future for rural carriers that thrive on the propagation characteristics of sub-1 GHz spectrum perhaps more than their larger rivals that see most of their customers and usage focused in larger markets more apt for higher frequency bands.
Across many of this week’s discussions, a pair of the underlying topics focused on the potential length of the auction proceedings and the amount of money those proceedings could raise.
As for timing, the auction is scheduled to begin on March 29, with FCC Chairman Tom Wheeler recently stating he remained “supremely confident’ of that start date. But, that date is just the beginning of what is expected to be a process that some predict could drag on for most of 2016.
Trey Hanbury, a partner at Washington, D.C.,-based law firm Hogan Lovells, explained the first several weeks of the proceedings could be limited to inventorying spectrum resources potentially being offered up by television broadcasters, with those companies looking to bid on the spectrum up for offer not getting a chance for up to 45 days. That would mean the more traditional aspect of the auction proceedings might not begin until mid-May.
The exceedingly complex nature of the forward- and reverse-auction process could also see the proceedings drag on because of that complexity that is sure to keep legal departments busy.
The potential financial return has indeed drawn increased interest from television broadcasters. The more than $40 billion raised during AWS-3 seemed to have made the FCC’s lobbying efforts of the broadcast community a bit easier, with some expecting the 600 MHz proceedings could draw an even larger amount of total winning bids.
Patrick McFadden, VP for spectrum policy at the National Association of Broadcasters, threw out $60 billion and $80 billion in potential revenues – partially in jest – as to what his constituency is looking for the auction to bring in. McFadden stuck to the company line in stating broadcaster interest would at the end of the day come down to individual business decisions, but obviously cash would help in giving those decisions some direction.
Hanbury was a bit more cautious on his estimates, but did note that the auction’s overhead could easily top $40 billion, including what will likely be needed to get at least 84 megahertz of total spectrum out of the hands of broadcasters, cover relocation costs for those broadcasters needing to be moved to new spectrum locations and for general costs associated with running the complex procedure.
The fact that more spectrum could be available in the 600 MHz auction compared with the AWS-3 proceedings would seem to lead credence to claims the 600 MHz auction should draw a higher overall haul. However, with up to 30 megahertz of the 600 MHz spectrum set aside outside the auction’s deepest pockets and with Sprint taking itself out of the running for the set aside spectrum, the incentive auction’s overall take could be hampered.
AT&T has already said it would spend at least $9 billion in the proceedings tied to garnering regulatory approval on its DirecTV acquisition. However, the carrier did just spend more than $18 billion in AWS-3 and may not be looking to go much above its pledge total.
Verizon Wireless has remained somewhat coy on its total interest, though the carrier does have a history of spending big in auctions having spent nearly $10 billion in the 700 MHz auction and just over $10 billion in AWS-3.
Speaking at a recent investor conference, T-Mobile US CFO Braxton Carter said he thought the carrier might get away with spending just $1.5 billion for licenses, though did add the carrier could have up to $10 billion to spend should the need arise.
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