Forward auction bidding hits key milestone in FCC 600 MHz incentive auction, leaving broadcasters with $10B in proceeds and telecom operators to maneuver.
The Federal Communications Commission’s 600 MHz incentive auction passed a significant milestone towards completion following four rounds of back-and-forth bidding between television broadcasters and telecommunication operators.
The government agency noted that after round two of forward bidding in the auction’s stage four, all final stage rules were met, which means the proceedings will not need to include another round of reverse bidding. All that’s left now is for telecommunication operators participating in the forward bidding process to parse out bidding strategy between reserved and unreserved blocks.
As for the reverse auction results, the magic number for television broadcasters was just over $10 billion in proceeds in exchange for handing over 84 megahertz of spectrum in the 600 MHz band. In turn, telecom operators participating in the forward auction process had so far offered up more than $18 billion after two bidding rounds in stage four.
The television broadcast community likely ended up with proceeds lower than anticipated, but are still set to garner a significant payday for spectrum that was originally given to them and in today’s digital world is not necessarily needed to continue operations. The auction’s initial reverse bidding round, which included 126 megahertz of spectrum the FCC was looking to clear from broadcasters, came with a clearing price of $86 billion.
The National Association of Broadcasters, which represents many of the television broadcasters participating in the auction, provided a terse statement on the conclusion of the proceedings.
“NAB looks forward to the close of the incentive auction, and to working with the FCC and Congress to develop a repacking plan and transition schedule that protects viewers and avoids service disruptions,” stated Dennis Wharton, EVP of communications at NAB.
The FCC has so far stuck with a planned 39-month repacking schedule, meaning broadcasters would need to vacate the spectrum included in the auction by that time. However, NAB had previously stated such a timeline was unreasonable due to the extremely complex nature of the transition.
“While the top-line results have been disappointing to some, the $10 billion of proceeds are expected to inject new life into some segments of the broadcast industry and support future opportunities for other stations to monetize their spectrum,” explained Dan Hays, partner at PwC’s Strategy& division. “The ultimate spread between the forward and reverse auctions will also provide a multibillion dollar payday for the federal government, further enforcing its interest in auctions.”
Pre-auction forecasts were all over the place in terms of what the FCC could generate as part of its first-of-a-kind incentive auction process. Some had forecast forward auction bids could top $80 billion, while a majority seemed to settle in at around the $30 billion to $40 billion mark.
Making the process hard to predict was the various stages involved in the process, with each additional stage if necessary resulting in less spectrum being offered up. Many did however note the stage four level of 70 megahertz of clean licensed spectrum was a likely stopping point for the process as it aligned with the number and size of bidders participating and had a minimum amount of overhead spectrum that was set to be turned into unlicensed capacity.
The auction is set to continue its official forward bidding process as telecom operators position their bids between markets with demand greater or less than supply. Walter Piecyk from BTIG wrote in a research note this part of the process could last through February, which would mean final results could be announced in March.
In digging into the current results, Piecyk noted that of the country’s 25 largest markets, only Houston was sitting with more demand than supply, and that 139 markets out of the 428 partial economic areas up for bid were also under greater demand than supply.
Piecyk also noted it was likely T-Mobile US and AT&T were two of the more aggressive bidders in the auction, with Verizon Communications likely picking up coverage in markets it was outbid in during the AWS-3 auction, and Dish Network and Comcast as other potential companies picking up licenses in larger markets.
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