Auction bids slow, but money continues rolling in: Martin optimistic D Block will reach reserve, but open for alternatives

Compared with yesterday, when potential winning bids added more than $4 billion to the bottom line, bidding early today in the Federal Communication Commission’s 700MHz spectrum auction looked downright sleepy. Although bidders dumped another $1.8 billion in bids into the auction through the first three rounds of this morning, bringing the total to nearly $17.5 billion after round 24, the number of new bids rolling in began to slow.

Potential winning bids dropped from 929 per round yesterday to 681 bids per round through the first three rounds today. Like previous auctions, the FCC has said it will continue the proceedings until no new bids are placed.

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For the seventh straight round the package of eight C-Block licenses covering the 50 states did not receive a new bid, further strengthening analysis that C-Block bidding could be finished. Bidding on the package grew steadily throughout the opening rounds of the auction until round 17, when the price tag reached $4.7 billion. The bid passed the $4.6 billion reserve price and triggered the somewhat controversial open-access provision on the spectrum.

‘Important transformation’

FCC Chairman Kevin Martin expounded on the significance of the license meeting the reserve price.

“This is an important transformation for the auction and for the wireless industry,” Martin said. “I think this just demonstrates the continuing pattern that we’ve seen since the commission adopted these rules last summer of further increasing the openness of the wireless networks.”

Martin noted that before the auction began Jan. 24, AT&T Mobility and Verizon Wireless — the nation’s two largest mobile-phone carriers — said they would allow third-party devices and applications to connect to their networks.

While the C Block remained static in the 700 MHz auction, the B-Block licenses continued to attract most of the attention. The 12 megahertz, B-Block license covering Chicago continued gained new bids during round 22 and 23, pushing the potential winning bid on the license to $892.4 million. The license is the most expensive single license so far in the auction, and has garnered the highest value per megahertz/potential customers covered at $9.19 per MHz/pop, according to Optimal Markets Inc.

The B-Block license covering the New York City area also remained attractive, picking up a new bid in each of the three rounds held so far today to push its potential winning price to $731.3 million, or $3.78 per MHz/pop.

D Block options

Not so flush with interest, the D Block remained on the sidelines. It appears the national commercial-public safety D-Block license will be heading to a re-auction as its current $472 million potential winning bid sits well short of the $1.3 billion reserve price.

Martin said he remains optimistic a bidder would come forward to meet the $1.3 billion reserve price for the D-Block license, adding he would work with Congress to explore options for the D Block if no bidder agrees to pay the minimum price for license.

On a related front, Harlin McEwen, chairman of the Public Safety Spectrum Trust, said the group reached a formal agreement with Cyren Call Communications Inc. regarding the latter’s role as an advisor for build out of the D Block. McEwen said Cyren Call arranged a loan from venture capital firms to fund the PSST through the end of the auction. He said the PSST, a non-profit, public-safety organization and the 700 MHz national public-safety broadband licensee, could receive a second loan if a D-Block winner emerges. The D-Block licensee must negotiate a network-sharing agreement with the PSST.