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FCC sets H Block spectrum auction for Jan. 14, with Sprint seen as lead bidder

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The FCC said in a public notice that it will start an auction of the 1900 MHz PCS H Block on Jan. 14, 2014, its first major spectrum auction since 2008. The auction is likely to draw interest from Sprint (NYSE:S), while Dish Network (NASDAQ: DISH) has signaled it will likely not participate.

In July, the FCC had signaled the auction could start in January but it was not final at that point. As Bloomberg recently reported, Dish and T-Mobile US (NYSE:TMUS) had been urging the FCC to delay the H Block auction until later so that it could be put together with other spectrum bands the FCC must auction by February 2015, as mandated by Congress. T-Mobile, in particular, is interested in those other airwaves, and argued in FCC filings that grouping the auctions together could produce more bidders and revenue.

T-Mobile and others are also worried that Sprint may wind up being the sole bidder for the spectrum. Sprint has repeatedly expressed its interest in bidding for the H Block and using the spectrum to enhance its LTE service.

BTIG analyst Walter Piecyk also suggested in August that the FCC delay the auction. "It feels strange to argue for a delay in a spectrum auction given our past complaints about the FCC's inability to source new spectrum but in this case it makes too much sense," he wrote in a blog post. "Moving the planned January auction of the H-Block back to the second half of 2014 when it can be simultaneously auctioned with the AWS-3 M-Block has several possible benefits:

  1. Improves usability of H-Block and potentially increases its size by 50%
  2. Doubles the possible auction values
  3. Helps fund a meaningful portion of Public Safety Broadband Network
  4. Enables more efficient spectrum planning
  5. Attracts greater participation in the Incentive Auction

Alternatively, what does a premature auction achieve other than a self-congratulatory press release by the Commission for getting something done?"

As things stand, the FCC said the H Block auction, dubbed Auction 96, will have a reserve price of $1.56 billion, based on a minimum spectrum value of $0.50/MHz-pop, as suggested by Dish. The proceeds of the auction will be used to build a nationwide public safety broadband network, though the H Block auction will only cover a small portion of the full cost of building that network.

"We believe this amount will appropriately recover for the public a portion of the value of the spectrum, especially in light of the Spectrum Act's requirement to deposit proceeds from this auction into the Public Safety Trust Fund to be used for a nationwide, interoperable public safety broadband network by the First Responder Network Authority," the FCC wrote in its public notice.

The spectrum will be auctioned in 176 individual Economic Areas across the country. The public notice sets out minimum opening bids and other auction procedures.

The H Block is a 10 MHz block of paired airwaves that runs from 1915-1920 MHz (for the uplink) and from 1995-2000 MHz (for the downlink). The H Block is part of 65 MHz of spectrum Congress mandated the FCC to auction by February 2015. As Democratic Commissioner Jessica Rosenworcel noted in June, of the 65 MHz that has been identified, the H Block is the only block that is paired and not in use by government agencies, so revenue generated from the auction of the H Block will not have to be used to pay government users to move off the spectrum.

However, Rosenworcel said she disagreed with the commission's decision to split the H Block from other upcoming auctions. She said in a statement that "holding a single auction of all 65 MHz at once is bound to yield more interest, more bidders, and more revenue than dividing this spectrum up and holding an auction of the 10 MHz H block alone. As Wall Street analysts have noted, splitting this spectrum up for auction will likely limit interest in the H Block to only one, or possibly two bidders. If that is true, we will have a retail sale--not an auction. Moreover, it will mean reduced revenue from this spectrum--and less support for our nation's first responders. "

Acting FCC Chairwoman Mignon Clybrun praised the FCC's action. "This will be the first major spectrum auction since 2008, and will help close the spectrum gap as well as contributing to the goal of making mobile broadband available to our nation's first responders," she said in a statement.

"Bringing this valuable 10 MHz of paired spectrum into the commercial marketplace as soon as possible will benefit Americans in two ways," Republican FCC Commissioner Ajit Pai said in his own statement. "First, it will help deliver bandwidth-intensive mobile services and applications. Second, the proceeds of the auction will provide much-needed revenue for the First Responder Network Authority to build out a nationwide, interoperable broadband public safety network."

For more:
- see this FCC notice
- see this FCC document
- see this PhoneScoop article
- see this Bloomberg article
- see this BTIG blog post (reg. req.)

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