FCC set to begin 600 MHz incentive auction forward bidding process, with Verizon, AT&T and T-Mobile likely to be most aggressive
More than 60 entities are set to begin bidding on 600 MHz spectrum licenses as part of the Federal Communications Commission’s incentive auction proceedings, which are scheduled to kick off this morning.
The FCC is set to hold just a single round of bidding today, though that round is scheduled to last six hours. The government agency has scheduled a pair of two-hour rounds each day through the end of the week, with bidders turning their attention to 100 megahertz of licensed spectrum up for bid.
The forward auction process is similar to past spectrum auctions in that bidding will continue for as long as licenses receive qualified bids.
“Unlike the reverse auction, in which there is a limited number of possible rounds, forward auction bidding rounds for a stage can continue without limit so long as demand outpaces supply for any product,” the FCC noted. “As such, we cannot predict when the forward auction will conclude.”
Setting aside guard bands, the FCC is offering 10 blocks of spectrum, each with 10 megahertz of spectrum across most of the country. Those licenses will be split into 428 partial economic area coverage blocks, with a total of 4,030 licenses with less than 15% impairment and 18 licenses with between 15% and 50% impairment set to be included.
As expected, licenses covering New York City and Los Angeles have the highest opening round reserve bidding price of $135 million and $100 million, respectively. Like past auctions, the FCC will be releasing top bid amounts for each license following the close of rounds, though will not be releasing the entity with top bids until the auction concludes.
The FCC in June wrapped up the first stage of the proceeding’s reverse auction portion, which resulted in television broadcasters setting 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.
FCC Chairman Tom Wheeler acknowledged the government agency may need to conduct further reverse auction stages should forward auction bidding not meet the current $86 billion 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.
“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,” noted Berge Ayvazian, senior analyst and consultant at Wireless 20/20. “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.”
RCR Wireless News recently spoke with Dan Hays, principal at PwC’s Strategy& division, to get his insight into the auction proceedings, including any potential impact on the launch of “5G” services.
Qualified bidders include three of the nation’s four largest operators, as well as a number of rural operators and designated entities. Those qualified include Verizon Wireless, AT&T, T-Mobile US, U.S. Cellular and C Spire, as well as some international interest in the form of Japan’s NTT DoCoMo, which is expected to bid on FCC controlled licenses covering Pacific islands.
The FCC previously said it will set aside 30 megahertz of the repackaged spectrum for carriers that do not already control a significant amount of sub-1 GHz spectrum holdings, which is predominately made up of AT&T and Verizon Communications.
T-Mobile US is expected to be the most aggressive bidder for the set-aside spectrum, with some predicting the carrier could spend up to $10 billion on licenses. While not eligible for the set-aside licenses, analysts predict AT&T could bid between $10 billion and $15 billion for licenses – having committed to at least $9 billion in bids as part of gaining approval of its DirecTV acquisition – while Verizon is predicted to bid around $10 billion. Verizon Wireless is also expected to bid up to $10 billion on spectrum.
Sprint, which has sat out all of the FCC’s recent spectrum auctions, announced last year it would again sit out the competitive bidding process. The carrier noted a need to focus on improving its network and that it already had sufficient spectrum due to its vast portfolio in the 2.5 GHz spectrum band.
Make sure to check back at RCRWireless.com for updates on the bidding process.
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