600 MHz incentive auction proceeds top $14.4B, boosted by more and faster daily rounds; milestone likely to be hit today
Bidding activity in the Federal Communications Commission’s 600 MHz incentive auction proceedings remains robust, with the past three rounds adding $1.8 billion in total and net auction proceeds.
Following 12 rounds of bidding, participants had pledged more than $14.4 billion in total auction proceeds and more than $13.8 billion in net proceeds. However, the auction still remains significantly short of the $88.4 billion in net proceeds needed to meet the demands of television broadcasters willing to give up the 600 MHz spectrum up for bid in the auction.
The latest activity included the first day in which the FCC held three rounds of bidding, with each round lasting one hour. The auction had previously conducted two rounds of bidding per day, each lasting two hours. The FCC has scheduled the current format through at least the end of the week.
The FCC is offering up various blocks of spectrum across 428 partial economic areas, with each block containing 10 megahertz of spectrum.
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 has 62 qualified bidders, including the likes of Verizon Wireless, AT&T Mobility, T-Mobile US, U.S. Cellular and C Spire.
Analysts have noted today’s bidding activity should see the auction hit at least one milestone, which is the $15.9 billion in total proceeds tied to meeting the minimum price per unit of spectrum.
“Satisfying the first component of the auction’s final stage rule is an important waypoint en route to a successful auction outcome,” explained Dan Hays, principal at PwC’s Strategy& consulting group. “In crossing this hurdle, the auction demonstrates that it can at least meet the minimum price per unit of spectrum required by the auction rules.”
Hays added that despite reaching the per unit milestone, the auction is still not likely to meet the $88.4 billion overall target price.
“Despite this achievement, the auction remains far from finished,” Hays said. “We still expect that a second stage of both the reverse and forward auctions – at a minimum – will be likely required to satisfy the second component of the final stage rule and cover the full proceeds and costs of the auction.”
RCR Wireless News recently spoke with Hays prior to the beginning of the forward auction proceedings as part of the weekly Carrier Wrap video show.
FCC Chairman Tom Wheeler acknowledged the government agency may need to conduct further reverse auction stages should forward auction bidding not meet the current 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 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 had been predicting the forward auction could generate up to $50 billion in total bids on 100 megahertz of post-packaged spectrum.
In terms of timing, Hays said he expects bidding to slow, with a potential end to the current first stage coming as soon as next month.
“Participation in the forward auction has been robust in the early rounds, with demand in key markets at nearly double the available supply of spectrum,” Hays noted. “We expect to see a gradual slowdown in the growth of auction proceeds over time. At its current pace, the first stage of the forward auction has no end in sight though it could well come to a close as soon as early to mid-September.”
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