Bidding activity was top-heavy in the opening round of the FCC 600 MHz incentive auction, with demand outstripping supply in many markets
Despite some pessimism about the eventual outcome of the proceedings, the mobile telecommunications industry showed robust enthusiasm for the 600 MHz spectrum auction currently up for bid by the Federal Communications Commission.
The first round of forward bidding in the FCC’s 600 MHz incentive auction proceedings generated more than $8 billion in net “winning” bids, or roughly 10% of the more than $88 billion in total proceeds expected to be needed for a successful auction. Most of the initial bidding was heavily weighted toward the auction’s more populous licenses, which garnered significant interest from participants.
Following conclusion of the proceeding’s reverse auction, the FCC is offering up various blocks of spectrum across 428 partial economic areas, with each block containing 10 megahertz of spectrum.
As expected, the New York City-based partial economic area license block received the greatest amount of interest, with bidders putting in claims for 33 10-megahertz blocks of licenses at the opening price of $135 million per license. However, the FCC only has 10 of those blocks available, showing much greater demand currently than supply, and thus only 10 bids are counted toward the current total of net winning bids.
The Los Angeles-based PEA drew 20 bids for the five available license blocks at an opening round price of $100 million per block, followed by 28 bids for the 10 Chicago-based PEA blocks at $49.5 million per block. The San Francisco-based PEA saw the second-highest activity with 29 bids placed for 10 available PEA blocks at a price of $47.5 million per block.
By comparison, the opening round of the FCC’s AWS-3 auction, which finished with a record $41.3 billion in net proceeds, drew $1.8 billion in opening-round winning bids.
Similar to recent spectrum auctions, the FCC is only releasing bidding information on markets and not on which bidders have placed those bids. The current auction includes 62 qualified bidders, including the likes of Verizon Wireless, AT&T Mobility, T-Mobile US, U.S. Cellular and C Spire.
The FCC managed to clear a total of 126 megahertz of spectrum from television broadcasters as part of the reverse auction at a clearing target price in excess of $86 billion. Factoring in additional clearing and administrative charges, the bidders will need to post winning bids in excess of $88 billion in order for the current forward auction results to count. That amount came in well above expectations, leading many to note the FCC will likely need to conduct additional bidding stages in order to hit financial levels in line with bidding demand.
FCC Chairman Tom Wheeler acknowledged that the government agency may need to conduct further reverse auction stages should forward auction bidding not meet the current $86 billion clearing target. Those additional stages could result in less spectrum being transitioned from television broadcasters to mobile telecom operators, as well as the potential for the auction to stretch into next year.
The FCC previously said it will set aside 30 megahertz of the repackaged spectrum for carriers that do not already control a significant amount of sub-1 GHz spectrum holdings, which is predominately made up of AT&T and Verizon Communications.
T-Mobile US is expected to be the most aggressive bidder for the set-aside spectrum, with some predicting the carrier could spend up to $10 billion on licenses. While not eligible for the set-aside licenses, analysts predict AT&T could bid between $10 billion and $15 billion for licenses – having committed to at least $9 billion in bids as part of gaining approval of its DirecTV acquisition – while Verizon Communications is predicted to bid around $10 billion. Verizon Wireless is also expected to bid up to $10 billion on spectrum.
Sprint, which has sat out all of the FCC’s recent spectrum auctions, announced last year it would again sit out the competitive bidding process. The carrier noted a need to focus on improving its network and that it already had sufficient spectrum due to its vast portfolio in the 2.5 GHz spectrum band.
Following the six-hour opening round, the FCC is set to conduct a pair of two-hour bidding rounds each day through the end of this week.
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