Stage 4 of the forward portion of the FCC's spectrum auction will continue to round nine Thursday (Jan. 26), after bidding in smaller markets continued to increase the total by a few more million, which will be going to the Treasury. 

Forward auction bidders bid up the total for 70 MHz of spectrum to $18,505,053,387 Wednesday afternoon (Jan. 25), up about $22 million from $18,483,638,387 in the previous round that day.

That activity insured that the auction would continue into a round nine starting at 10 a.m. on Thursday.

The auction will close after this forward auction stage because both key benchmarks — covering broadcasters' asking price plus $1.9 billion in auction and repacking costs and a set spectrum floor price in the top 40 markets — have been met (what was referred to as the "final stage rule").

There was, again, no excess demand in the top 40 markets in round nine -- there had excess demand in the number three market, Chicago, as recently as Monday, as well as in a couple of other markets since the benchmarks were met and the auction proceeded to what is essentially a clean-up phase. 

The auction will continue until demand does not exceed supply in any of the 416 markets.

After the main auction closes, the winners will participate in a second auction for specific frequencies. The current auction is only to win generic blocks of 10 MHz, 5 uplink and five downlink, with seven blocks available in each market.

Stage four could end any day, or continue for weeks, but regardless, the FCC in the next couple of weeks will start letting all full-power and Class A stations know what their new channel assignments will be in the post auction repack, though they cannot share them or make them public.

According to the FCC, the second stage of the forward portion of the FCC’s broadcast incentive auction—which only launched Wednesday—went only one two-hour round, is now closed and the FCC will have to move to yet another round of reverse auction broadcasters bidding at a lower clearing target.

There was no one immediately available for comment, but the FCC's website said that "Bidding in the forward auction has concluded for Stage 2 without meeting the final stage rule and without meeting the conditions to trigger an extended round."

That one round of the forward auction ended with only $21,519,907,210 bid. That is below the closing bid total for round one of the forward, not surprising given that there was less spectrum up for bid, though that could also have boosted the price if demand stayed the same given the reduction in supply.

Clearly the $56.5 billion broadcasters were asking—this time 114 MHz (90 MHz minus the guard bands) down from 126 MHz (100 MHz minus guard bands)—was still too rich. Forward auction bidders weren't ready to up their bids from last time, and they took no time in making that clear.

The closing after one round means that demand for spectrum in the top 40 markets (actually top 40 geographic areas dubbed PEAs) was not sufficient for the bidders to up their price for the decreased supply.

Once that happens, even if there is bidding still going on in markets below the top 40, the FCC closes the stage, as happened in this case, and now moves to stage three of the reverse auction, at what will likley be the 108 MHz clearing target.

"This is a complicated auction design and no significance should be attached to interim steps.  As supply contracts in future stages I am confident that the auction will become more competitive leading to a successful conclusion," said Preston Padden, former executive director of the Expanding Opportunities for Broadcasters Coalition.

The FCC said it would issue further guidance next week on when stage three of the reverse auction would begin, and at what clearing target.

The FCC has eleven different spectrum targets, the next being 108 MHz. Some see the 84 MHz as the potential equilibrium point between broadasters' asks and forward bidders' pocket books.

The second stage of the FCC's reverse portion of the spectrum incentive auction closed last Thursday (Oct. 13). It took 53 rounds for broadcasters to come up with their selling price, but only one for forward auction participants in teh top markets to come up with their counter.

“NAB is surprised by the results of wireless carrier bidding in the second stage of the FCC’s TV auction. Broadcasters look forward to the third stage of bidding and a successful completion of the auction," the National Association of Broadcasters said in a statement.

NAB has been primarily focused on stations remaining in the broadcasting business, so is eager for a resolution so the FCC can focus on repacking stations post-auction and helping those broadcasters roll out a new, interactive, ATSC 3.0 transmission standard.

Scott Bergmann, VP of regulatory affairs for CTIA, which represents the wireless carriers, did not sound surprised by the auction lightning round.

“We always expected the incentive auction to be a multi-staged process," he said, something the FCC has emphasized. "We continue to believe this auction will produce spectrum for the wireless industry that’s key to our nation’s economy and meeting consumer demand.”

"The rapid close of the second stage of the forward auction shows just how delicate the balance of supply and demand is for the 600 Mhz spectrum in question," said Dan Hays, analyst with PwC Strategy& .

"The lack of upward motion in the total forward auction proceeds may be disheartening to many broadcasters, who were eagerly awaiting a further narrowing of the gap after reducing their own clearing cost by over 35% just last week. However, it is important to remember that this is all taking place very much by design; the auction is working as planned in an attempt to find a level of spectrum clearing where supply matches demand."

The FCC said Tuesday that the forward portion of the broadcast incentive auction has now closed, after round 27, without meeting the conditions necessary to extend it to a Round 28 or to meet the $88.3 billion target bidders needed to to cover the cost of payments to broadcasters.

If fell far short of that, generating only $23,108,037,900 in total bids and netting just $22.45 billion after bidding credits and discounts.

Bidding had slowed appreciably, and showed signs it would clearly not hit the $88.3 billion mark -- the FCC's magic number.

The FCC has not yet announced when it will start Stage 2, which means going back to broadcasters at the lower clearing target.

The auction was planned for multiple rounds, but having to go back to a reverse auction and then a second stage forward auction will add to the time frame and mean fewer broadcasters will get a big payday, though the prices could go up for the spectrum given that supply is being reduced.

The FCC will likely start stage 2 of the reverse auction next week. It has to leave at least five days between stages, but probably won't take much more than that.

The original reverse auction took four weeks, so that is probably a good gauge for the stage 2 reverse. The stage 1 forward auction took two weeks.

In the next five days the FCC will release new information on a new spectrum target and when the reverse auction will begin. It will also put out a refresher tutorial for broadcasters.

The FCC will be buying fewer stations in the reverse auction this time around. Some stations will be getting lower prices, and some of those could drop out, deciding they don't want to sell at that price.

Demand for spectrum in the FCC's forward auction took a big drop in Round 25.

In most of the top markets, supply and demand were on par, suggesting the FCC may have started to find its spectrum price points and may soon have to lower its spectrum sights and return to the reverse auction at a lower clearing target.

The total bid in round 25 was $22,985,963,900, vs $22,704,101,100 in Round 24, or an increase of only a little more than 1%, while the FCC was raising prices by 10%.

The FCC divided the spectrum into 416 partial economic areas, and in only a few does demand exceed supply. The auction won't end until there are no markets with excess demand, so money could still move around.

In top market New York, round 22 had seen 19 licenses bid for with only 10 available. In round 25, only 10 licenses were bid for. The story was the same in many top markets.

In fact, in eight of the top 10 markets, supply no longer exceeded demand, with Los Angeles -- at bids for eight licenses with only five available -- and Houston with bids on 11 licenses with 10 available -- the only exceptions.

But the auction won't close successfully unless the net figure for bids -- the total minus bidding credits and discounts -- meets or beats $88.3 billion. The Round 25 figure was only a little more than a quarter of that at $22,320,000.

One spectrum watcher who conceded a second stage is likely said that prices should go up in the next round when the FCC reduces the supply of licenses.

Broadcasters were willing to give up 126 MHz in the reverse auction, but it looks like wireless buyers won't be covering the FCC's $86 billion clearing cost.

But the auction was always set up for multiple rounds. The next clearing target is 114 MHz. The FCC will go back to broadcasters, continue the reverse auction at that, come up with a clearing cost, then take a second crack at a forward auction. 

With a couple of dozen rounds of the forward portion of the FCC spectrum auction in the books, the bidding stood at $22,704,101,100, up just under $700 million from round 23's $22,077,875,100.

The magic number, which is the bid total minus discounts and bidding credits, stood at an even $22 billion.

That is the number that must be quadrupled (plus a bit) to the $88,379,558,704 that will cover payments to broadcasters and the cost of the auction and post-auction TV station repack.

Demand in the top two markets -- New York and Los Angeles -- continued to drop, though in both cities demand still exceeded supply. In both cases, the FCC was still getting its asking price, which it is increasing by 10% in each round.

Related:Spectrum Auction Bids Up Over $860M After Round 22

If the FCC does not raise enough to cover the $88-plus billion figure, it will move to stage 2 of the auction, where it will lower the spectrum clearing target from 126 MHz to 114 MHz, continue the reverse auction at that lower figure--winnowing out some of the broadcasters that would have been paid at the higher spectrum-clearing total--then try to cover that new figure in a forward auction.

The FCC has nine possible spectrum clearing targets down to a low of 42.

After Monday's (Aug. 29) first round of the spectrum auction -- Round 22 -- in which the FCC raised the per-round price increases from 5% to 10%, the bids totaled $21,436,324,000, or up a little over 4% ($867,927) from round 21's $20,568,397.

That means while the FCC is upping its top prices for the spectrum by 10% in each round, in many markets the demand is not supporting that price increase, given that if the FCC were getting that higher price in all markets, the bid total would have increased by more than $2 billion.

But in many markets supply is exceeding demand, though that could change as money moves around.

Net of bidding credits and discounts, the round 22 total was $20,790,000, which is the figure that has to eventually get to $88,379,558,704 or more to cover broadcasters' payments and moving and auction expenses if the auction is to close after Stage 1, in which 126 MHz is being auctioned in 416 geographic license parcels to 62 qualified bidders, including Comcast, AT&T, Dish and T-Mobile.

Demand was lower in some of the top 10 markets over the past few rounds as demand began to align more with supply. In New York, demand continued to exceed supply by 2 to 1, but in Chicago and San Francisco, for example, there were 10 bids for the 10 available licenses.

In Dothan, Ala., there were bids for only three of the 10 licenses, and while the FCC had raised the price to $715,000, those three bids were for only $650,000.

The FCC is doubling the asking price increases for spectrum in the forward auction to 10% per round, up from the 5% per round it has been implementing so far.

The change will take effect as of Monday, Aug. 29. The FCC can raise the increments anywhere from 1% to 15% per round.

The forward auction is a "clock" auction where the FCC increases the price of the 416 available geographic spectrum licenses in each round. Upping the price increase is one way of speeding the process, which is importantly particularly if the FCC can't raise enough to pay broadcasters and has to lower its spectrum target in a second take on the reverse auction then hold a second forward auction after that.

As of the end of Round 16 Thursday morning (Aug. 25), the bidding stood at a total of $17,149,091,000, which net of bidding credits and discounts means the FCC has raised $16.49 billion toward the $88,379,558,704 it needs to cover broadcaster payments and auction costs.

That is up from the $16,391,244,000 and $16,391,244,000 net in round 15, when the FCC met the first of two benchmarks for closing the auction.

Related:Read More Spectrum Auction News

In the forward auction, 62 parties are eligible to bid on 416 PEAs (partial economic areas). Those include Comcast, Dish and AT&T. They are bidding on broadcast spectrum the FCC reclaimed from broadcasters in the reverse auction.

If, as most observers speculate, bidders do not pony up enough to meet that $88.379 billion benchmark at the 126 MHz clearing target in this, stage one, of the auction, the FCC will lower its sights to 114 MHz, pay broadcasters less in a continuation of the reverse auction, and hope to cover that lower figure in a new forward auction.

The FCC has set nine spectrum-clearing targets ranging from the current high of 126 MHz to 42 MHz -- depending on how the marketplace values the spectrum.

If the auction goes to a second stage, it could push into calendar year 2017.

After 15 rounds and eight days, the forward portion of the FCC's spectrum auction has met one of two benchmarks for closing the auction.

With $16,391,244,000 bid in the latest round (which translates to a net $15.730 billion minus bidding credits and discounts), they have exceeded the $15,896,290,987 total the FCC set as the minimum bid price at this clearing target and all clearing targets above 84 MHz.

The Round 14 numbers were $15,717,686,000 and $15.060 billion, and Round 13's were $15,077,767,000

The net $15.730 after Round 15 is still many billions of dollars short of what the FCC will need to close the auction without having to move to a second stage of broadcast bidding.

That second benchmark is the $88,379,558,704 the FCC will have to raise for the spectrum to cover the cost of paying broadcasters for that spectrum, paying for the logistics of conducting auction itself, and paying for TV station relocations so those bidding in the forward auction can get access to the spectrum.

The auction is expected to last a couple of months, so there is plenty of opportunity for that total to continue to rise, particularly given that the FCC is raising the price on the spectrum blocks by 5% a day and requiring bidders to use 95% of the bidding credits they have committed to, though not necessarily on any particular spectrum in any particular market.

If, as most observers speculate, bidders -- including Comcast, Dish and AT&T -- do not pony up enough to meet that second benchmark at the 126-MHz clearing target in this, stage one, of the auction, the FCC will lower its sights to 114 MHz, pay broadcasters less in a continuation of the reverse auction, and hope to cover that lower figure in a new forward auction.

The FCC has set nine spectrum-clearing targets ranging from the current high of 126 MHz to 42 MHz -- depending on how the marketplace values the spectrum.

In spectrum auctions, the FCC traditionally sets some benchmark spectrum price it will accept. This one was calculated by multiplying the target price for a unit of spectrum, in this case $1.25 per unit (called "MHz pops"), by 70 MHz (how much spectrum would be sold with an 84 MHz clearing target -- some of the spectrum in all the targets won't be sold but is reserved for guard bands), by the population covered by the category 1 blocks (those with the least impairment due to interference) in the top 40 PEAs (PEAs are the geographically-based partial economic units the FCC has divided the spectrum into).

At clearing targets below 70 MHz, the $15,717,686,000 benchmark would be reduced since the 70 MHz multiplier will decrease.

Update:In Round 15, Bidders Hit First Spectrum Auction Benchmark

The forward part of the FCC's spectrum incentive auction continued to pick up steam Wednesday (Aug. 24), with the latest round -- No. 13 -- bringing in $15,077,767,000 in bids.

That's $14.450 billion net of discounts and bidding credits for various parties (and up more than $500 million from the $14,440,301,000/$13.820 generated in round 12) . It is also nearing one of two benchmarks for closing the auction, while the second remains a distant figure on the horizon.

The FCC cannot close the auction until the forward portion net amount (the amount above $14.450 billion) equals or exceeds the $88,379,558,704 (that figure on the horizon) the FCC will need to cover the cost of paying broadcasters for that spectrum, paying for the logistics of conducting the auction itself and paying for TV station relocations so those bidding in the forward auction can get access to the spectrum.

But there is also another benchmark to closing the auction, which is the one that could be met today (Aug. 24).

In order to assure that the government is getting fair value for the licenses relative to what has been paid in similar auctions, the FCC generally sets a benchmark minimum price, in this case a formula based on multiplying "the price benchmark of $1.25 per MHz-pop, by the forward auction spectrum benchmark of 70 megahertz by the total number of pops associated with the Category 1 blocks in high-demand [top 40] PEAs [partial economic areas, which is how it divided up the 126 MHz of spectrum reclaimed]."

That comes to a total of $15,896,290,987.

So, when that number is met, as it likely will be by the end of today, the FCC will have met one of its two benchmarks for closing the auction.

At the end of round nine of the forward portion of the FCC spectrum incentive auction, bids totaled $12,610,269,00.

When discounts and bidding credits are subtracted, the spectrum auction has now drawn $12,040,000,000 toward the $88,379,558,704 it will take to close the auction and start moving broadcasters to new spectrum quarters.

That $12.6 billion total was up from the $12,043,700,000 bid in round eight.

The FCC reclaimed 126 MHz from broadcasters in the reverse auction contingent on being able to get enough in the forward auction to cover that $88.379 figure. If not, it is back to the reverse auction at a lower clearing target--114 MHZ--so it will have a smaller figure to have to cover when it returns for a second bite at the forward auction. The auction has been structured with multiple clearing targets.

The FCC is increasing the number of rounds from two, two-hour a day sessions to three, one-hour sessions starting Tuesday (Aug. 23). It did not say why, but did say it could adjust the auction as it monitored the bidding.

It is currently raising the prices by 5% per round, but could increase or decrease that figure as it sees fit, or could add or subtract rounds as it continues monitoring. The auction will increase in complexity in the latter rounds, so the FCC could slow it again if it chose.

The auction is a clock auction, with the FCC raising the price each round and requiring bidders to bid in each round using at least 95% of the bidding units they have committed to, though they can be used on any of the 416 partial economic areas (PEAs), the geographic units into which the spectrum has been divided.

That means that if demand increases in a market from one round to the next, it could mean either less demand in that market, or that the bids were being parked there strategically--given the 95% use requirement--before being moved to another market.

Currently, in top market New York, demand for spectrum at the round nine clock price of $199,458,000 was 2.6 times the demand, but that was down from 3.3 times the demand in the earliest rounds.

Forward auction bidders include Comcast, AT&T, Verizon, Dish and T-Mobile.

With round three under its belt, the forward portion of the FCC's spectrum incentive auction has now generated $9,700,723,000 in bids.

Actually, net of discounts and bidding credits to eligible entities including minority and women-owned businesses, the figure is $9,210,000,000.

The FCC will need at least $88,379,558,704 to cover the cost of (1) paying broadcasters for their 126 MHz worth of spectrum; (2) paying them to move off that spectrum; and (3) paying for the auction itself. The bidding also has to meet certain price benchmarks in the top 40 PEAs if the FCC is to close the auction.

The round three total is up about $660 million over round two, when $9,038,042,000 was bid (net $8,570,000) for the formerly broadcast spectrum, offered in 416 partial economic areas, or PEAs.

It is a marathon, not a sprint, and the auction is expected to take up to several months before the FCC knows whether it can cover that figure or will have to lower its spectrum sights to 114 MHz and resume the reverse portion of the auction. The FCC designed the auction for multiple spectrum clearing targets if the first is not met.

Currently the FCC is conducting two rounds per day of two hours apiece, 10-12 a.m. and 2-4 p.m., but that number could be increased and the length shortened as the auction progresses as a way to speed the bidding process.

With one round in the books in the forward portion of the FCC's spectrum incentive auction, bidders have so far ponied up $8,490,410,000 toward the 100 MHz of spectrum up for grabs in 416 geographic areas, though with bidding credits and discounts that figure drops to $8,040,000,000 toward meeting the final stage rule.

That is according to the FCC's online auction tracker, which is providing some real-time data on bids and prices after the close of each round.

Bidding began today (Aug. 16) at 10 a.m. and closed at 4 p.m. On Aug. 17, the FCC will hold two, two-hour rounds per day.

The FCC will have to generate $88,379,558,704 in bids -- after bidding credits and discounts -- during the likely months-long process to cover the $86.4 billion in promised broadcasters in the reverse auction, plus the almost $2 billion for broadcasters moving expenses following the auction and the cost of administrating the auction itself.

There are 62 eligible bidders, including Comcast, AT&T, Verizon, Dish and T-Mobile.

The second round of bidding for Yahoo should close this week, with Verizon Communications reportedly lobbing in a $3 billion offer for the one-time Internet icon’s Web assets.

That’s roughly half the value some analysts placed on those properties three months ago, and further proof that telco Verizon either has money to burn or truly believes that digital advertising will be its future growth engine.

Other bidders were expected to participate in the second round — CNBC’s David Faber reported some bids topped $5 billion, but included real estate and other assets not part of the Verizon bid. A third round of bidding on Yahoo, which put itself on the block in February, is also expected.

Most analysts are expect Verizon to end up with Yahoo because they believe that the telephone provider has the best chance of turning around the once-proud company. That bids are coming in at less than half the $4 billion to $8 billion range targeted back in February is a testament to the decline of the business.

STARK FORECASTS

Yahoo’s bankers released a “sale book” in April that estimated 2016 revenue would fall 15% and earnings would dip more than 20%. The book also estimated that Yahoo would need to shed about 1,500 employees, ending the year with about 9,000 workers.

Verizon has had a soft spot for ancient Internet icons — it purchased AOL last year for $4.4 billion— and talk is that AOL chief Tim Armstrong is behind the telco’s enthusiasm for Yahoo. According to some reports, Armstrong believes Yahoo’s digital ad technology will mesh well with AOL’s existing ad business.

Verizon chief financial officer Fran Shammo didn’t want to say much about the Yahoo speculation at the Bank of America Merrill Lynch Technology, Media & Telecom conference in London, though he did say the telco is serious about its “mobile-first” strategy.

Within the next three to six months, Shammo said, Verizon intends to “cross-pollinate” its products, including integrating go90 and AOL to help it broaden viewership.

“When you get down to it, viewership matters because viewership drives advertising dollars which drives the top line revenue,” Shammo said. “Yahoo has viewership. We’ll see whether we do move forward or we don’t move forward.”

MoffettNathanson principal and senior analyst Craig Moffett has been ambivalent to a Verizon-Yahoo pairing ever since the telco expressed interest in the assets.

“Generally speaking, we think Verizon’s strategy to turn to advertisers rather than users for the next leg of wireless revenue growth makes sense, even if we admit to having a hard time judging their probability of success,” Moffett wrote in April.

He added that although it probably isn’t a great idea to buy a shrinking asset (Yahoo) in a growing segment (digital ads), taking into consideration expected synergies and the relatively low price, it can’t hurt.

Shammo was most excited about opportunities on the mobile front, especially in short-form content. Verizon bought a 24.5% piece of shortform video pioneer AwesomenessTV in April and he said that its go90 mobile offering will focus on video snippets rather than longform content.

“I want to fill up the 10 times a day that you have 10 minutes free,” Shammo said. “I want you to come to my platform and digest 10 minutes of content from go90.”

But to pay for those 10 minutes, viewers are subjected to ads, and that’s where Yahoo could fit in.

While mobile ads are on the rise — Kleiner Perkins Caulfield & Byers partner and Internet guru Mary Meeker values the mobile ad market at about $22 billion — clients have complained that consumers aren’t watching them. That is backed up In Meeker’s June Internet Trends report, which claims 93% of mobile users are considering purchasing ad blockers and 81% mute video ads.

VIDEO ADS ON THE RISE

The push has been to make mobile ads more watchable, and that’s where Yahoo could come in.

Yahoo has sharpened its focus on short-form video and says video advertising is one of its fastest growing business segments. According to a blog around Yahoo’s May NewFronts, chief revenue officer Lisa Utzschneider said video advertising was up 64% in 2015 and continues to grow. Yahoo is focusing on producing more ad content — the ad unit produced 54% more video in 2015 than in 2014 and viewers are eating it up. Compared to a year ago, Yahoo video viewers are consuming 55% more content and spending 85% more time on average with it.

“That translates into meaningful opportunities for marketers,” Utzschneider said in her blog post.