FCC Chairman Tom Wheeler told a subcommittee the agency may need to host additional bidding rounds in its 600 MHz spectrum auction plans
Federal Communications Commission Chairman Tom Wheeler admitted that the government agency may need to host additional bidding stages in its ongoing 600 MHz incentive auction process in order to match television broadcaster demand for financial compensation with spectrum demand from the wireless telecom space.
Speaking this week before a U.S. House of Representatives Subcommittee on Communications and Technology hearing looking at FCC oversight, Wheeler touted the recent end of the reverse-auction portion of the proceedings, which resulted in an $86 billion clearing target to free up the maximum of 126 megahertz of the 600 MHz spectrum. 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.
“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.”
Wheeler explained that applicants interested in bidding on the freed-up spectrum assets made upfront payments by July 1, and are now qualified to participate in the auction’s forward process. Expected bidders include Verizon Communications, AT&T and T-Mobile US. Sprint had previously stated it would not participate in the process.
FCC staff is said to now be working on procedures for the forward auction process, with plans for a practice and mock auction to be held in the coming weeks, with clock phase bidding set to follow.
“Post-auction transition planning is focused on finalizing the relocation reimbursement process and systems and developing a schedule for relocating stations that will remain on the air to assure that the transition can be completed in a timely manner,” Wheeler told the hearing.
Analyst and industry observers, many of whom were expecting a potentially high number from the reverse auction, were still surprised by the amount. However, most seemed to indicate the amount would likely force the FCC to conduct a second stage of the reverse auction later this year in order to bring down the clearing price, potentially lowering the total amount of spectrum available and also pushing the auction proceedings into next year.
“At a clearing cost of more than $86 billion, the barre had been set high for the wireless industry,” noted Dan Hays, principal at PwC’s Strategy& division. “Given the current financial profile of the industry, this number may have to move significantly lower. A second stage of the reverse auction later this year is likely. Indeed, we could well see the proceedings drag on into early 2017 before coming to a final conclusion.”
Berge Ayvazian, senior analyst and consultant at Wireless 20/20, who had been one of the more bullish analysts in terms of how much money the 600 MHz auction might generate, said the current clearing price would require bidders outside the traditional telecom space for overall auction proceeds to come close to the target.
“The FCC will need to attract big bucks and several new bidders if the 600 MHz forward auction is going to be completed before the end of 2016,” Ayvazian noted. “Carrier war chests have been stretched in recent years and together AT&T, T-Mobile and Verizon may bid as much as $30 billion. So it may be up to newcomers such as Comcast to reach the clearing cost of more than $86 billion, and a second stage of the reverse auction may be needed later this year.”
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