High, perhaps unrealistically high, price asked for TV spectrum

by Steve Blum • , ,

Golden.

It’ll cost $86 billion to free up 100 MHz of broadcast television spectrum for licensed mobile broadband use and another 26 MHz for guard bands and unlicensed users. That’s the result from the reverse auction run by the Federal Communications Commission for television station owners, who were supposed to progressively bid down the price they were willing to accept in exchange for giving up their assigned channels.

That figure is more than twice as much as originally expected. The estimates made when the bidding began earlier this month pegged the likely cost at around $37 billion. The actual result was a jaw dropper for pretty much everyone involved – staggering amount is a common description – although in retrospect it makes a certain amount of sense. The next step is for mobile broadband companies to bid on how much they’re willing to spend to get the spectrum. If they don’t bid enough over the coming month to cover broadcasters’ offered price, the reverse/forward auction will go to another round. So keeping the sell price high in what would be just the first round of haggling is a rational move.

At this point, there’s little expectation that mobile broadband companies will be willing to meet that price. So the next step would be to cut back on the amount of spectrum sought and ask broadcasters to bid down sell prices again. It’s possible that three or more rounds will be needed, dragging the process into next year. The sky high price also throws cold water on hopes that the double auction would produce a windfall profit – once pegged at $24 billion – that would go towards public safety network upgrades.