Forward bidding in FCC 600 MHz incentive auction stage four set to begin on Wednesday with target price seen as attainable to end proceedings.
The Federal Communications Commission’s ongoing 600 MHz incentive auction proceedings could come to a quick end following the latest reverse auction round that witnessed television broadcasters slash their financial compensation request to $10 billion.
The fourth stage of the auction’s reverse bidding process concluded last Friday, with television broadcasters cutting the price for what they would be willing to sell 84 megahertz of spectrum to just a touch over $10 billion. The FCC is set to repackage the spectrum into 70 megahertz of clean spectrum it plans to include in the auction’s forward bidding process set to begin on Wednesday.
The reverse auction result was a 75% drop from the previous round where broadcasters were asking for $40.3 billion in compensation for 108 megahertz of spectrum, which in turn drew just one round worth of bidding for 80 megahertz of clean spectrum in the forward auction process indicating a lack of interest from telecommunication operators.
The latest reverse auction round came in well under most estimates, with analysts now forecasting a strong chance the auction process could conclude with the current round.
“The dramatic reduction in the targeted net proceeds of the reverse auction shows just how effective the auction mechanics have been in bringing together supply and demand,” noted Dan Hays, principal at PwC’s Strategy& division. “Such a move was hoped for given the 24 megahertz reduction in the spectrum clearing target for stage four, and at just over $10 billion we are confident that the auction is well within striking range of the budgets of mobile network operators.”
Hays said he thinks the auction could conclude as early as next week, though an additional round is “not out of the question.”
“For broadcasters, this is a clear indication of extremely strong competition to relinquish their spectrum, even at dramatically lower prices,” Hays added. “The ball is now squarely in the court of the wireless industry to bring things to a close.”
Stage four of the forward auction is set to include a total of 2,912 “category one” spectrum blocks, each containing 10 megahertz of spectrum with no impairment. Each of the 416 partial economic areas used to divide up the spectrum licenses will include seven blocks of spectrum, with a total of 70 megahertz of spectrum up for grab in each PEA.
In terms of how much money the forward bidding process could generate, BTIG’s Walter Piecyk explained in a research note that the current stage would require $12.2 billion in total winning bids to take into account the $10 billion for broadcaster compensation and $2.2 billion to the FCC for repacking and clearing costs. However, stage three ended with $19.7 billion in total bids for 80 megahertz of spectrum, which with the removal of one 10-megahertz block could result in winning bids of around $17.6 billion.
The current stage is also crucial in terms of the auction’s often cited “set aside” provision, which is designed to prevent carriers with a dominate position in holding sub-1 GHz spectrum from bidding on licenses in certain markets unless certain milestones were achieved. Pre-auction rules included up to 30 megahertz of at least 70 megahertz of spectrum in some markets to be included in this provision, which is expected to see considerable interest from T-Mobile US.
AT&T and Verizon are expected to be most aggressive for the 40 megahertz of spectrum open to all bidders, with each perhaps going for as much as 20 megahertz each in some markets.
Should the auction wrap up over the next week, Piecyk said he expects auction winners could be announced around March 1, with the ongoing anti-collusion period ending March 15.
Spectrum clearing aligns with 5G deployment plans
Once completed, the FCC has set a 39-month timeline for television broadcasters to clear their operations from the 600 MHz spectrum band, which would put full spectrum availability into early 2020, or about the time most expect commercial 5G services to be coming on air.
Initial 5G deployments are expected to focus on higher band spectrum licenses in the 3.5 GHz band as well as millimeter wave bands higher than the 15 GHz band. These bands are set to include broad swaths of spectrum support in order to meet the expected capacity needs of 5G services.
However, broader coverage will require lower spectrum bands. Most see 5G deployments relying heavily on current LTE deployments using low-band spectrum in order to meet coverage demands, with the 600 MHz spectrum able to bolster the supply.
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