Forward mobile spectrum auction goes into reverse

23 October 2016 by Steve Blum
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Maybe it’s just a Rockford?

Well, that didn’t take long. Two hours after the Federal Communications Commission starting taking bids from mobile carriers (and, perhaps, would-be mobile carriers) for 90 MHz of television spectrum, it shut the auction down. Instead of stretching out for several bidding sessions over many days, or even weeks, the second stage of the incentive auction ended fast, and on a down note.

Mobile carriers were willing to pay $21.5 billion for the 90 MHz that was on offer. Unfortunately for them, though the minimum price set was $56.5 million. That’s about a billion dollars less than the carriers were willing to pay in the first stage of the auction, when 100 MHz was up for grabs. On the other hand, the gap is closing, sorta: in that first stage, broadcasters were asking $35 billion more than they did in this second one.

There are two schools of though as to what will happen when the FCC launches subsequent rounds of reverse-and-forward bidding, with progressively lower amounts of spectrum on the table. It could be that as the supply tightens, the value to buyers – the demand – will increase and mobile carriers will start putting more money on the table. There are a number of forecasters who talk about a final meeting price somewhere in the $30 billion range, for maybe two-thirds of the current amount of bandwidth that’s up for sale.

But there’s also the possibility that wireless carriers will simply say less spectrum is worth less money and keep their bids heading in a southerly direction. For the process to be a success, broadcasters would have to drop their asking prices at an even faster rate. In this case, success equals more spectrum for mobile broadband – where bandwidth demand continues to outstrip supply – and less for television broadcasting, where allocations made decades ago in ancient analog times are far too lavish in the digital age.

The FCC will announce the third stage schedule later this week.