The proceeds from the 3.45 GHz auction at the Federal Communications Commission (FCC) hit the agency’s reserve price of $14.77 billion on Wednesday and then some, ensuring the auction’s success.
Last week, alarm bells rang when it wasn’t clear the auction was going to hit the reserve price. For the first time in the FCC’s long and lustrous history of conducting auctions, there was a chance the bidding would not meet the reserve price and the auction wouldn’t close.
Alas, that did not happen. So how close was it to actually failing? Was all of this commotion just an attempt to get us to pay attention to what could have been a rather mundane auction of national airwaves, which, while hugely significant, is becoming rather routine? It is, after all, Auction 110, which means more than 100 auctions have come before.
“The significant drop in demand in Round 10 was worrisome,” said Sasha Javid, COO of BitPath and former chief data officer and legal advisor for the FCC Incentive Auction Task Force. He’s been closely tracking the auction here. “Even though excess demand in the largest markets remained robust, had another bidder followed suit, I am not sure proceeds would have reached the reserve price.”
However, “because no similar drop happened in the immediate rounds following Round 10, I was confident that the remaining bidders were committed to the success of this auction. The drops in demand in the following rounds were more typical of clock auctions as demand migrated from the largest markets and my prediction last week of meeting the reserve price by Tuesday was off by a day,” he told Fierce.
If this auction follows the progression of the C-band auction, which concluded earlier this year with a record $81.2 billion in winning bids, reaching the $20 billion mark is definitely in the cards. Javid said he hopes it gets to his original forecast of $22.5 billion, but “that seems to still be a reach.”
At the end of Wednesday's rounds, gross proceeds stood at $16.43 billion.
For various reasons, auction participants are forbidden from talking about the auction for a period of time before, during and after the immediate end to the auction, so it’s mostly a guessing game as to what’s going on behind closed doors. However, Javid offers more insights in a LinkedIn post here.
Is there a chance this auction wraps up within days? No, Javid said. As of Round 42, which closed Wednesday afternoon, there were still 267 “products,” or licenses, with demand greater than supply.
“But excess demand in the largest markets is what drives total proceeds and I suspect bidding activity in those markets will be over this week,” he said. “Then we will enter the typical ‘long tail’ where activity in smaller markets will keep the auction going for quite a few more days. But this activity will not move the needle much in terms of total proceeds.”
RELATED: 3.45 GHz auction blasts past $7B
One of the consequences of auction failure would have to be on the backs of wireless carriers, which are the primary beneficiary of this auction. AT&T was favored to spend the most ($12 billion by some accounts) on 3.45 GHz spectrum, followed by T-Mobile and Dish. Some figured Verizon, having spent heavily on C-band spectrum, would bow out or participate just to drive up prices.
The 3.45 GHz auction began October 5 and was part of a mandate by Congress that the FCC begin the 3.45-3.55 GHz band auction no later than December 31, 2021. Bidders aren’t allowed to get more than four out of the 10 available licenses in a Partial Economic Area (PEA), or 40 MHz of spectrum, which was one of the criteria that critics groused about. The band is currently use by government incumbents.
RELATED: 3.45 GHz auction surpasses $1.5B, loses one large bidder
As of early Monday, analysts at New Street Research said the odds favored the auction meeting the reserve price, but “in light of the consequences if it does not,” they wanted to provide an analysis if the auction failed and implications for spectrum policy going forward.
Granted, they noted, their observations might constitute the “quickest route to obsolescence” of any of their reports, but they shared their thoughts anyway with the idea being the analysis would be helpful in the upcoming battle over the 3.1-3.45 GHz band.
One of their recommendations was to watch the reaction of the Department of Defense (DoD). Wireless carriers have been clamoring for more spectrum for decades, and the DoD in recent years has ponied up more spectrum under Congressional mandate.
“The reason we think their reaction [at DoD] may be the most important is that the Defense Department uses the spectrum most sought after by carriers (the mid-band, and in particular, not only the spectrum being auctioned but also the next bit of spectrum that is to be considered for auction, the 3.1-3.45 GHz band),” wrote New Street policy analyst Blair Levin.
In addition, “we think the Department of Defense reaction will be more critical than others because it is the most important stakeholder whose reaction is likely to represent the beliefs of the leadership that will be in place when the battle is finally resolved. Neither the FCC nor the NTIA has permanent leadership,” Levin said. “The relevant Senate and House committees both have recently had long-time staff leave, replaced by staff that, while talented, have limited expertise and were not around when Congress mandated the auction timing.”