The bidding in the clock phase of the 3.45 GHz auction closed Tuesday after reaching more than $21.8 billion, placing Auction 110 among the highest grossing auctions in FCC history.
In fact, it’s the third biggest auction after the C-band, which raised more than $81 billion earlier this year, and AWS-3, which ended with over $44 billion for the U.S. Treasury in 2015.
Bidding had slowed in recent rounds, signaling the end was near. Major markets had seen little or no activity for a while, and some auction observers were getting impatient for the FCC to speed up the auction with shorter rounds. In the end, bidders won 4,041 of the 4,060 available generic blocks.
Auction 110 makes available 100 megahertz of mid-band spectrum for commercial use across the contiguous United States, and winners can use it for fixed or mobile uses. Licenses are divided into ten 10-megahertz blocks based on Partial Economic Areas (PEAs); bidders were limited to a total of four blocks, or 40 MHz, per market.
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Like past spectrum auctions, this one attracted the biggest wireless carriers, all of which qualified to participate: AT&T, Verizon, T-Mobile, in addition to UScellular, Dish Network and private equity firm Grain Management. The actual winners won’t be known until after the assignment phase, which many expect to close by the end of December, with winners free to talk by early next year.
However, based on what is known, the biggest bidder is widely expected to be AT&T; analysts at New Street Research in a note today said they figure AT&T spent nearly $9 billion for 40 MHz of 3.45 GHz spectrum nationwide.
T-Mobile is the next likely highest bidder in their view, spending on the order of $6.6 billion for 30 MHz, with Dish Network potentially spending $5.25 billion or more and Verizon likely being a mostly no-show. That would leave about 6 MHz at $1.3 billion for small carriers and financial buyers by New Street’s estimates.
Intrigue surrounding Round 10
However, there was some drama early on, when one large bidder dropped out of the action after Round 10 (the auction ended after 151 rounds.) Some folks immediately thought it might be Dish, but that idea was nixed when Dish raised more than $5 billion in a secured debt offering, which designated the funds in part for new spectrum.
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In light of Dish’s financing announcement, it’s most likely Verizon or T-Mobile that decided in Round 10 that they were no longer interested in securing four blocks nationwide in this auction, said Sasha Javid, COO of BitPath who’s been closely tracking the auction here. “Those are guesses,” he told Fierce.
That said, he also noted that pulling back at that point didn’t make a lot of sense because if the bidder (again, unknown at this point) didn’t want to participate, they simply could have sat out of the auction, as previous participants have done. That wouldn’t have tipped their cards because companies can qualify to bid but refrain from participating, and no one would be the wiser until the whole thing is over. Recall that Comcast and Charter qualified for the C-band auction and came away empty-handed.
“I remained puzzled about the timing of this pullback as prices at that point in the auction were very low. Also, in light of the recent FAA announcement, if it was Verizon that dropped demand, they may be having second thoughts,” he said, noting that Verizon could take solace in the fact that by the time the FAA’s C-band concerns came to light, the 3.45 GHz auction had progressed so far that there was little that any bidder could do to change course.
The idea is that if Verizon can’t get access to C-band spectrum as fast as initially thought, the 3.45 GHz band would look a lot more attractive even if it is more encumbered with federal users. One factor seeming to make the 3.45 GHz spectrum less attractive than, say, C-band was earlier this year, is licensees who use the 3.45 GHz spectrum need to ensure coexistence with federal incumbents where and when they require continued access to the band.
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Regarding those federal incumbents, “pricing and demand comparisons make clear that the DoD coordination requirements did have an impact on this auction. Demand in the most heavily ‘impaired’ large markets of San Diego, Philadelphia and Baltimore-D.C. were depressed from the start,” Javid said. “In PEAs with both Category 1 and Category 2 blocks, the Category 2 blocks sold for prices almost 8X higher because of smaller and shorter coordination requirements.”
Next steps
The FCC will now move to the assignment phase of bidding where, in a series of bidding rounds, each clock phase winning bidder will have the opportunity to indicate its preferences for specific frequency licenses corresponding to the generic blocks it won in each category and PEA in the clock phase, according to Ari Meltzer and Rick Engelman of the Telecom, Media & Technology Practice at Wiley’s law firm in Washington, D.C.
Based on prior auctions, they expect the FCC to issue a Public Notice in about one week announcing the schedule for the assignment phase bidding, with the final results of the auction in mid- to late-December.
Here are some more take-aways from the Wiley auction team:
- The unusually long clock phase of Auction 110 concluded after 151 rounds and 29 days of bidding.
- The overall population-weighted average bid price finished at $0.7156/MHz-POP, about 24% less than the $0.9423/MHz-POP average in Auction 107 and 230% more than the $0.2169/MHz-POP average in Auction 105.
In addition, bids were submitted for 99.7% of the MHz-POPs being offered. The only blocks not sold were:
- All four Category 1 blocks in PEAs 139 (Hot Springs, Arizona), PEA184 (Ruston, Louisiana) and PEA332 (Bennettsville, S.C.);
- Two out of four Category 1 blocks in PEA033 (Virginia Beach, Virginia), PEA196 (Cape Girardeau, Missouri), and PEA345 (Newberry, S.C.); and
- One out of four Category 1 blocks in PEA120 (Shreveport, Louisiana).