NAB jabs carriers following sluggish first stage of spectrum auction

Washington DC skyline

The National Association of Broadcasters took a quick jab at wireless carriers following the end of the first stage of the incentive auction of 600 MHz spectrum.

The FCC ended the first stage late Tuesday after bidders offered a little more than $23 billion by the end of the 27th round, which was a far cry from the $88.4 billion that was needed to end the selloff of 126 MHz airwaves. The FCC must now reduce the amount of spectrum it will free up for wireless and resume talks with TV broadcasters in the reverse auction where it ended during the previous stage.

The NAB took note of the massive gap in light of recent concerns from some in the wireless industry that carriers are struggling to cope with a shortage of airwaves.

“NAB is surprised by the modest participation by wireless carriers in the first stage of the TV auction,” said Dennis Wharton, executive vice president of communications, in a brief statement. “Perhaps the notion of a ‘spectrum crisis’ peddled in Washington for the last seven years is not as acute as policymakers were led to believe. We look forward to the second round of the auction where wireless carriers will be afforded another bidding opportunity.”

The FCC has maintained that the auction wasn’t designed to be completed as quickly as possible, but rather to evolve progressively to strike a balance between what bidders are willing to pay for the airwaves and what TV broadcasters are willing to settle for. Indeed, the initial clearing cost of $88.4 billion was far higher than analysts’ estimates that were generally in the range of $30 billion to $40 billion.

“It was widely anticipated, if not fully expected, that the auction would not close after the first round,” wrote Scott Bergmann, CTIA’s vice president of regulatory affairs, on the trade group’s blog. “Once the Stage 2 reverse auction ends, forward auction bidding on the new mobile broadband spectrum will pick up where it left off today, at the lower clearing target. This is how the Incentive auction was designed to work.”

Bergmann also noted that bidders have already ponied up the second-highest total in FCC auction history, topping the $18.96 billion reached by the last auction of low-band airwaves in 2008. And Walter Piecyk of BTIG Research said a slow first round may not necessarily be indicative of lower-than-expected demand for spectrum by wireless companies.

“It was likely obvious to bidders that the auction would not end in Stage 1, so bidding may have had more to do with maintaining eligibility for future Stages than with any specific strategy,” Piecyk wrote. “Stage 1 ended despite sixteen markets that had demand greater than supply because no Category 1 blocks in the top 40 markets increased.”

Piecyk conceded that broadcasters “might not be thrilled by the early forward results,” adding that the final clearing target may be less than half the original $88.4 million. But the quick wrap-up of stage one may renew hopes that the entire event could conclude by the end of the year.

And that would be good news not just to carriers looking to put their new airwaves to use as quickly as possible, he said, but also Dish Network and any other player looking to leverage their existing airwaves through partnerships or selling or leasing them.

The conclusion of stage one “was a month earlier than our recently revised expectations and increases the possibility that the auction can be wrapped up by year end, which will be welcome news to FCC Chairman Tom Wheeler and investors anxious to see the conclusion of the deal inhibiting anti-collusion period,” Piecyk wrote.

For more:
- see this CTIA blog post
- read Walter Piecyk’s analysis

Related articles:
Incentive auction moves to stage two after failing to garner $88.4B target
First two rounds of forward auction of 600 MHz airwaves draws over $9B in bids
The forward portion of the incentive auction starts tomorrow, and no one knows what to expect
Rama, Sinclair not on final list of bidders for 600 MHz spectrum auction
600 MHz incentive auction primer: Who will bid, when it will happen, how it will work, and how much money it will raise