Clearing cost plummets to around $10B for Stage 4 of FCC's incentive auction

Stage 4 of the reverse portion of the FCC’s incentive auction ended Friday, with TV broadcasters setting a clearing cost of just more than $10 billion for up to 84 MHz of airwaves, falling dramatically short of the $40.3 billion set in Stage 3 and marking a tiny fraction of the $86 billion set in Stage 1.

On the plus side, the auction may not slog on much longer.

“Broadcasters were really suicidal,” Tim Farrar of TMF Associates tweeted Friday afternoon. “Looks like we should be done next week unless someone decides to play games.”

That would bring a disappointing end to an auction that once was predicted to generate $60 billion or more as bidders – including carriers who have long expressed concerns about a “spectrum crisis” – vied for the 600 MHz airwaves often described as “beachfront” property. Indeed, Chairman Tom Wheeler said earlier this year he expected to see a “spectrum extravaganza” during the auction.

Instead, Stage 3 of the auction fizzled out in early in December after a single round that generated less than half of the $40.3 billion that was needed to end the event. That dismal round followed a second stage that also lasted only one round, generating $21.5 billion in bids before sputtering to a halt in October.

RELATED: Year in Review: Lethargic bidding in the FCC’s 600 MHz spectrum auction

The incentive auction was created as a tool to enable the FCC to go back and forth between TV broadcasters and companies looking to acquire spectrum, lowering the amount of airwaves available in each stage to find a price that strikes a balance between supply and demand. That structure has proven effective, according to Dan Hays, a principal at consulting firm PwC, even if it hasn’t lived up to the expectations of TV broadcasters hoping to cash in on their airwaves.

Multiple factors appear to be at play in what thus far has been an underwhelming auction: Demand for 600 MHz spectrum appears to have dampened in favor of higher-band airwaves that can boost capacity; carriers’ budgets are constrained as competition in the U.S. wireless market has heated up; and operators may be expecting increased consolidation under a Donald Trump administration.

“The dramatic reduction in the targeted net proceeds of the reverse auction shows just how effective the auction mechanics have been in bringing together supply and demand,” Hays said in prepared remarks. “Such a move was hoped for given the 24 MHz reduction in the spectrum clearing target for Stage 4, and at just over $10 billion we are confident that the auction is well within striking range of the budgets of mobile network operators.

“It could well close as early as next week, maintaining smaller operators’ access to the 30 MHz of spectrum set aside for companies with relatively little spectrum below 1 GHz,” Hays continued. “For broadcasters, this is a clear indication of extremely strong competition to relinquish their spectrum, even at dramatically lower prices.”

If Stage 4 ends as expected, though – and perhaps even if there’s a Stage 5 – the incentive auction is certain to fall far short of expectations. The question once the auction ends will be which current carriers and would-be service providers took advantage, and which lost out on what might be a huge opportunity to stockpile spectrum.

"If there is a God, Stage 4 closes," longtime TV broadcast executive Preston Padden said in a terse statement to the media Friday.