FCC sets 108 MHz clearing target for Stage 3

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The FCC set a clearing target of 108 MHz in the incentive auction as it prepares to return to TV broadcasters next week to once again determine how much it will cost to free up their airwaves for wireless users.

Bidding will start in the reverse auction portion of Stage 3 of the event Nov. 1 with a single, four-hour round, according to the FCC’s auction site. The event will then proceed for three days with two, two-hour rounds, then shift the following week to three one-hour rounds per day.

Once the third reverse auction wraps up the FCC will issue the clearing cost – the amount of money that bidders must offer up during the forward auction for the spectrum. If that figure isn’t met during the forward auction, the FCC will return to TV broadcasters a fourth time, once again lowering the amount of spectrum it will free up for wireless use.

The FCC is serving as something of a matchmaker in the auction of 600 MHz airwaves, going back and forth between broadcasters and bidders to settle on a price that strikes a balance between supply and demand. And analysts say a fourth stage of the auction will likely be needed to close the gap between the two groups.

Stage 1 of the auction ended in late August when bidders ponied up only $23 billion for TV broadcasters’ airwaves, falling far shy of the $88.4 billion clearing cost the FCC had set for 126 MHz of spectrum. And industry analysts were surprised last week when Stage 2 ended after just a single round that saw bidders offer $21.5 billion for the spectrum, less than half the $54.6 billion clearing cost.

The 600 MHz airwaves up for grabs are sometimes referred as “beachfront” property because of their propagation characteristics, which had led some onlookers to predict that proceeds from the event would surpass the record $44.9 billion generated by the spectrum of AWS-3 spectrum that ended in January 2015. Indeed, FCC Chairman Tom Wheeler said earlier this year he expected to see a “spectrum extravaganza” as companies vied for airwaves to meet ever-increasing demand for mobile data.

Despite long-standing concerns over a so-called “spectrum crisis,” though, demand for TV broadcasters’ airwaves certainly appears to have fallen short of expectations. In fact, as Walt Piecyk of BTIG Research wrote recently, another one-round stage might be in the offing next week.

“So with plenty of spectrum to source three bidders with 20 MHz of spectrum each, a $55 billion bogey that most believed was out of reach, and no major reduction in eligibility, it should not be a total shock that wireless operators were inactive during this stage,” he wrote following the end of Stage 2. “If the reverse auction does not end below $30 billion in Stage 3, we might see another one round forward auction in Stage 3.”