WASHINGTON— Broadcasters asked $10 billion for 84 MHz in the fourth stage of the TV spectrum incentive reverse auction, which concluded as scheduled on Friday, Jan. 13.
The 84 MHz clearing target will yield 70 MHz of spectrum for wireless bidders in the fourth-stage forward auction, with the remaining 14 MHz dedicated to interference buffer zones, or “guard bands.”
The fourth-stage forward auction is tentatively scheduled to begin Wednesday, Jan. 18. The Federal Communications Commission previously said it would confirm this date on Tuesday, Jan. 17—the day after the Martin Luther King, Jr. Day federal holiday —but that “forward auction bidders should be prepared for bidding to begin that day.”
Fig. 1
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Bidding in the fourth stage reverse auction started Dec. 13, following three previous stages that failed to close at higher clearing targets. In Stage 3, broadcasters sought $40.3 billion for 108 MHz, which left 80 MHz for wireless bidders after consideration for guard bands. Stage 3 concluded Dec. 5 after just a single round of bidding by wireless providers yielded $19.7 billion for the 80 MHz offered, a difference of $20.6 billion.
In Stage 2, broadcasters sought $54.6 billion for 114 MHz. Wireless bidders came back at $21.5 billion for 90 MHz after a single, two-hour round of bidding on Oct. 19. The auction commenced last March with a Stage 1 clearing target of 126 MHz yielding 100 MHz for wireless bidders. Broadcasters asked for $86 billion; wireless providers offered $23.1 billon before discounts.
Each successive stage of the auction has targeted sequentially less spectrum for clearing, as illustrated in Fig. 1, with prospective sellers and buyers coming progressively closer in price but not enough to close the auction. (See table below.) Auction observers have noted the current clearing target of 84 MHz is where sellers and buyers are most likely to come together because Ch. 37, which is reserved for radioastronomy, will serve as a de facto guard band between broadcast and wireless spectrum. Therefore, only one 3 MHz guard band between Ch. 37 and wireless spectrum, and one 11 MHz guard band between wireless up- and downlink spectrum is necessary, leaving more of the cleared spectrum available for sale.
“The dramatic reduction in the targeted net proceeds of the reverse auction shows just how effective the auction mechanics have been in bringing together supply and demand," offered Dan Hays, principal of Strategy&. “Such a move was hoped for given the 24 MHz reduction in the spectrum clearing target for Stage 4, and at just over $10 billion, we are confident that the auction is well within striking range of the budgets of mobile network operators.
“It could well close as early as next week, maintaining smaller operators’ access to the 30 MHz of spectrum set aside for companies with relatively little spectrum below 1 GHz. While a fifth stage of the auction is still not out of the question, it is now far from a certainty. For broadcasters, this is a clear indication of extremely strong competition to relinquish their spectrum, even at dramatically lower prices. The ball is now squarely in the court of the wireless industry to bring things to a close.”
Each stage of the auction represents a reverse-forward cycle that ends when either the final stage rule is met, or if there is no more excess demand in the top 40 partial economic areas, or PEAs, which represent the geographic area of license for wireless providers.
The final stage rule comprises meeting a reserve price reflective of market value, and raising enough revenue to pay the aggregate sale price, plus cover a$1.75 billion broadcaster relocation fund as well as the administrative cost of the auction itself.
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