FCC's Forward Auction Closes After Only One Round
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.
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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.
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"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.
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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.
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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."
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Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.