Shifting spectrum from TV to mobile broadband still looks expensive

by Steve Blum • , ,

Broadcasters have reduced their selling price by $32 billion in the second round of the Federal Communications Commission’s incentive auction, which ended yesterday. Even so, there’s still a big gap between that and what mobile broadband carriers were willing to pay in the first round.

The auction is aimed at moving legacy TV stations off of prime UHF real estate so mobile broadband companies can use the bandwidth instead.

The second, reverse round of the auction began last month, with 90 MHz of prime mobile broadband spectrum on the line (and another 24 MHz for unlicensed uses and guard band duty). TV station owners bid their selling price for that spectrum down from the $88 billion they wanted for 100 MHz in the first round to the current $56 billion ask for 90 MHz.

The problem is that mobile companies only bid $23 billion to buy 100 MHz the last time around. Looked at one way, broadcasters met mobile carriers more or less halfway: the $66 billion gap is now $32 billion and change. If mobile companies were holding back to a significant degree the first time, they might be willing to pay more this time. On the other hand, $23 billion might be the max given their expected return on the investment and chopping out 10% of the available spectrum could mean they’re not interested in paying as much as in the previous round.

It gets more complicated. It’s not enough to just match the selling and buying prices. Congress is expecting the FCC to raise extra money to pay for digital upgrades to public safety networks.

Although there’s always been the hope of a fast and lucrative finish to the incentive auction, the base assumption has been that several rounds will be needed. The FCC will launch the second half of the second round – the forward, buyer’s auction – next week.