TV broadcasters in stage 4 of the reverse portion of the FCC's incentive auction have set a new price for clearing off their TV spectrum: $10,054,676,822.
That is a huge drop from the previous round and sounds like a number wireless operators might be able to love, or at least meet, so long as the average price in the top markets also meets the second prong for closing the auction successfully. It is a far cry from the $86 billion broadcaster asking price when the auction began, though that was for much more spectrum. One low-power TV advocate called it a "fire sale."
"If there is a God, Stage 4 closes," said Preston Padden, former executive director of the Expanding Opportunities for Broadcasters Coalition, representing stations who were interested in putting spectrum in the auction under the right circumstances and at the right price.
That $10,054,676,822 is how much the government will have to pay—actually it will be wireless companies if/when the auction finally closes for good—to move broadcasters off 84 MHz of spectrum so it can offer it to forward auction bidders for wireless broadband. That is down from the $43 billion broadcasters wanted for 108 MHz in stage 3.
The 84 MHz translates to seven licenses of 10 MHz apiece (5 uplink and 5 downlink) in each of the 416 partial economic areas (the auction version of "market"), all unimpaired. That means 70 MHZ up for sale, with the balance going for buffer bands between services and channels.
Stage 4 of the reverse auction ended Friday, the 13th. Now it will be up to wireless bidders to determine if that was a lucky number. It would certainly appear to be low enough to get their attention.
The forward auction, stage 4, is expected to begin Jan 18.
Outgoing FCC chairman Tom Wheeler said in a speech Friday that the incentive auction was "nearing completion." Broadcasters who have been trying to give up spectrum, and those who have to wait until the auction is over to find out what their spectrum future holds, certainly hope he is right, though at least one broadcaster this week asked the new FCC to pause and reevaluate the auction, suggesting the wireless companies were going to get the spectrum at bargain basement prices.
There has been some suggestion that the FCC may have depressed wireless company interest by holding the auction too close to a previous wireless spectrum auction (AWS-3) and by freeing up upper bandwidth for potential use.
The reverse auction is where TV stations set the price at which they will give up spectrum—with the FCC lowering the price in each round—while the forward is where bidders compete for the rights to that spectrum, presumably for wireless broadband but technically whatever they want to do with it, with bids ideally going up as they compete for what has been billed as scarce and crucial wireless broadband spectrum.
Wireless bidders have so far failed to budge from their initial bid of a little over $20 billion, with the bid total actually decreasing a smidge as the FCC has successively decreased the amount of spectrum and forward auction bidders stuck to their prices, just for less spectrum.
The third stage of the reverse auction ended Dec. 1 with broadcasters asking $43 billion ($42,270,164,425 to be precise), but the forward auction took only an hour as those bidders refused to bid up the decreased supply, instead just holding to their price of $20 billion ($19,120,000,000 to be precise) and ending the forward auction almost before it had begun. The auction stage ends when demand does not exceed supply. Stage 4 began only a few days later.
The entire auction, which began May 31, can't end until wireless bidders cover broadcasters' asking price, plus another $2 billion in auction and post-auction repacking costs. The price in the top markets must also meet a benchmark minimum to insure the government is getting a fair price.
Broadcasters' stage one clearing price was about $86 billion for 126 MHz—the FCC set the prices high to attract those broadcasters.
The second stage price was about $55 billion. Forward auction bidders offered only $22 billion in stage one of the forward auction, then stuck with that price in the second stage, and the third, when broadcasters asking price dropped to $43 billion.
With the last three forward auctions ending in a single round, broadcasters have begun to question the wireless broadband "spectrum crunch" that led the FCC to propose the auction.
“Robust broadcaster participation is key to the success of the Incentive Auction," Wheeler said when the auction launched. The wireless industry has said it needs additional spectrum to meet growing customer demand and usher in the age of 5G.
The broadcasters have stepped up and done their part to fulfill that demand.
So far, the wireless bidders have not been ready to pay the price for that robust participation. But the price is now clearly in reach.
The auction was actually designed for multiple stages to let the marketplace decide, as it were, the price at which that spectrum would change hands.
The FCC began the auction at a clearing target of 126 MHz but has eight other targets. Stage 2 was 114 MHz, stage 3 was 108 MHz and stage 4 was 84 MHz. The others are 78, 72, 60, 48 and 42. The FCC set 138 and 144 as initial targets, too, but those were withdrawn in fall 2015 due to coordination issues with Canada.
The less spectrum the FCC reclaims, the fewer TV stations will get the big paydays many were hoping for and the lower the price, generally, for the ones who do get payouts. But as the amount of spectrum being reclaimed drops, the quality of the spectrum increases since there is more space to repack TV stations in to avoid interference.
A clearing target of 84 MHz or less was considered a disappointing result, said one source early in the process who had been tracking the auction for interested stations.
Back in September, public media outlet Current said 84 MHz would be a worst-case scenario in which only a handful of noncoms would share in any payout.
Initial estimates for the value of the spectrum ranged from $25 billion or so—at least in the ballpark of the current forward auction bid of a little less than $20 billion—to $80 billion or around broadcasters’ initial asking price.
The television industry's top news stories, analysis and blogs of the day.
Thank you for signing up to Next TV. You will receive a verification email shortly.
There was a problem. Please refresh the page and try again.