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First Part of the FCC Incentive Auction Sets Hefty Price
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The 600 MHz low-band wireless spectrum auction, popularly known as Incentive Auction, kicked off by the U.S. telecom regulator Federal Communications Commission (FCC) on Mar 29, 2016, recently completed its first part. Low-band spectrum is crucial for wireless operators as the signals can be transmitted over longer distances and through brick-and-mortar walls in cities.
In the first part, which is essentially a reverse auction, the airwaves are being freed by TV broadcasters who no longer have any productive use of the same. The TV broadcasters have agreed to free a substantial amount of 126 MHz of spectrums for a massive $86.4 billion.
In the second part of the auction process, the FCC will resale these airwaves to wireless operators, cable MSOs (multi service operators) or tech firms through competitive bidding. The second part is known as forward auction. Needless to say, the total bid price of the forward auction must reach at least $86.4 billion for the Incentive Auction to be successful.
However, several industry experts believe that telecom operators may be reluctant to offer such a hefty sum for low-band airwaves. Some industry watchers have also predicted that telecom operators may need around 70 MHz to 80 MHz of spectrums in the 600 MHz bands instead of the total freed up 126 MHz airwaves. In such a scenario, the FCC may have to conduct another round of reverse auction for a reduced volume of spectrum at lower prices.
Important bidders include national telecom giants like Verizon Communications Inc. (VZ - Free Report) , AT&T Inc. (T - Free Report) , T-Mobile US Inc. (TMUS - Free Report) , satellite TV operator DISH Network Corp. and cable MSOs (multi service operators) such as Comcast Corp. (CMCSA - Free Report) and Liberty Global Inc.
The FCC was initially hopeful that the whole Incentive Auction process can be completed by the end of the third quarter of 2016. However, industry watchers are now expecting the process to be much more prolonged and may continue till early 2017. Notably, the freed spectrums cannot be utilized commercially before 2020.
It is worthwhile to mention that the FCC had collected a substantial $45 billion approximately from the AWS-3 spectrum auction that was concluded in Jan 2015. The AWS-3 spectrum auction received 80 applications while the Incentive Auction received 104 applications.
Given the significant number of applications this time, the FCC expects its ongoing low-band airwave auction to be a runaway hit. The Congressional Budget Office has estimated that the Incentive Auction will generate a net value of around $25 billion after compensating the TV broadcasters. However, some highly optimistic estimates see FCC collecting more than $50 billion from the Incentive Auction.
The 600 MHz airwaves auction was initially supposed to have taken place in 2014. However, it was postponed owing to the complexity faced in designing auction rules and related legal issues. In Jan 2016, the FCC chairman, Tom Wheeler, expressed confidence that the Incentive Auction will be the “world's largest spectrum auction that has ever taken place.”
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First Part of the FCC Incentive Auction Sets Hefty Price
The 600 MHz low-band wireless spectrum auction, popularly known as Incentive Auction, kicked off by the U.S. telecom regulator Federal Communications Commission (FCC) on Mar 29, 2016, recently completed its first part. Low-band spectrum is crucial for wireless operators as the signals can be transmitted over longer distances and through brick-and-mortar walls in cities.
In the first part, which is essentially a reverse auction, the airwaves are being freed by TV broadcasters who no longer have any productive use of the same. The TV broadcasters have agreed to free a substantial amount of 126 MHz of spectrums for a massive $86.4 billion.
In the second part of the auction process, the FCC will resale these airwaves to wireless operators, cable MSOs (multi service operators) or tech firms through competitive bidding. The second part is known as forward auction. Needless to say, the total bid price of the forward auction must reach at least $86.4 billion for the Incentive Auction to be successful.
However, several industry experts believe that telecom operators may be reluctant to offer such a hefty sum for low-band airwaves. Some industry watchers have also predicted that telecom operators may need around 70 MHz to 80 MHz of spectrums in the 600 MHz bands instead of the total freed up 126 MHz airwaves. In such a scenario, the FCC may have to conduct another round of reverse auction for a reduced volume of spectrum at lower prices.
Important bidders include national telecom giants like Verizon Communications Inc. (VZ - Free Report) , AT&T Inc. (T - Free Report) , T-Mobile US Inc. (TMUS - Free Report) , satellite TV operator DISH Network Corp. and cable MSOs (multi service operators) such as Comcast Corp. (CMCSA - Free Report) and Liberty Global Inc.
The FCC was initially hopeful that the whole Incentive Auction process can be completed by the end of the third quarter of 2016. However, industry watchers are now expecting the process to be much more prolonged and may continue till early 2017. Notably, the freed spectrums cannot be utilized commercially before 2020.
It is worthwhile to mention that the FCC had collected a substantial $45 billion approximately from the AWS-3 spectrum auction that was concluded in Jan 2015. The AWS-3 spectrum auction received 80 applications while the Incentive Auction received 104 applications.
Given the significant number of applications this time, the FCC expects its ongoing low-band airwave auction to be a runaway hit. The Congressional Budget Office has estimated that the Incentive Auction will generate a net value of around $25 billion after compensating the TV broadcasters. However, some highly optimistic estimates see FCC collecting more than $50 billion from the Incentive Auction.
The 600 MHz airwaves auction was initially supposed to have taken place in 2014. However, it was postponed owing to the complexity faced in designing auction rules and related legal issues. In Jan 2016, the FCC chairman, Tom Wheeler, expressed confidence that the Incentive Auction will be the “world's largest spectrum auction that has ever taken place.”
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