BTIG: New clearing target for 600 MHz auction likely to be $50B to $65B

gavel auction

The FCC will likely drop its clearing target to a range from $50 billion to $65 billion during Stage 2 of the forward auction of 600 MHz spectrum, BTIG Research predicted, setting the figure for how much money must be raised for the event to be completed.

But the event will probably need at least two more rounds before it ends, the firm suggested.

The Commission is currently negotiating to buy back airwaves from TV broadcasters during the reverse auction in Stage 2 of the incentive auction, picking up where it left off in Stage 1. The first stage failed to generate the $88 billion needed to end the event, forcing the FCC to lower the amount of spectrum it will make available for wireless use and decrease the amount of money that must be raised.

The current reverse auction could end as early as next week, BTIG said, and the next forward auction will resume four days later.

“Based on our discussion with industry participants and investors, we believe the market expectation (to the limited extent that one exists) is for the clearing target to drop to $50 to $65 billion in Stage 2,” Walter Piecyk of BTIG wrote in a blog post. “That implies a drop of 25%-40% from Stage 1. This is a swag guess and, yes, you can drive a truck through that range. However, it could give a parameter by which to gauge market reaction ahead of next week’s datapoint.”

Regardless of where the clearing target falls, though, there’s little hope of the auction ending after Stage 2. A clearing target of less than $50 billion could imply a shorter auction than expected, Piecyk noted, and would probably result in more spectrum made available for wireless – but even that would likely require a third round. A clearing target in excess of $65 billion, on the other hand, would result in a longer auction and less spectrum freed up for service providers.

If the auction requires a fourth stage, the FCC would probably clear only 70 MHz of spectrum for wireless use, which would surely disappoint bidders hoping to get their hands on new airwaves. But the decreased supply would also drive up the price.

Regardless, the odds are good that the event stretches into 2017 – and perhaps even through February.

“It now seems likely that each stage of the reverse auction should take 52 rounds, so we have adjusted our timeline accordingly,” Piecyk wrote. “This change pushes our auction to the end of the year if it lasts three stages and into early 2017 if it lasts four stages, which is longer than our prior estimates…. The FCC could quicken the pace if it decided to conduct more rounds per day in the future.”

For more:
- see this BTIG Research blog post

Related articles:
Stage two of incentive auction set for Sept. 13
NAB jabs carriers following sluggish first stage of spectrum auction
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