By Braden Hall
The looming broadcast spectrum auction is garnering lots of speculation and attention. Although the intricacies involved have many speculating that the FCC will have to postpone the auction, FCC planners have been busy working on a proposed plan to conduct the new broadcast spectrum auction in March and release payment plans by early October. In the meantime, investors are focusing on individual carriers and their tactics surrounding the auction.
Barclays analysts Amir Rozwadowski and Kannan Venkateshwar outlined some of the key steps that will ultimately lead to the auction’s commencement. First the FCC will release the Applications Procedures Public Notice in early October (hopefully). This will hold all general information in regards to the actual auction process and procedures to follow after the auction is over. Second, the FCC will publicize the reverse auction opening bid prices for broadcasters. The opening bid prices are calculated according to each television station’s interference and population. Opening bid prices, for the forward auction, are established by the Bidding Procedures Bidding Notice and are useful for applicants to plan their upfront payments.
Once the FCC releases all the information required by law, applications to participate in the reverse and forward auctions will be accepted. As long as the applications are accurate, broadcasters will commit to its preferred bid option. If the price offered to a broadcaster drops during auction, the broadcaster is not required to surrender its spectrum, but it may if it chooses. Once broadcasters make their commitments, the auction system determines the band plan and initial clearing target. Mock auctions occur first, before bidding rounds actually start. After the clearing target and band plan are established, forward auction applicants make their initial payments, before they participate in a mock auction of their own.
According to a study by Kagan Media Appraisals, the auction itself is expected to garner between $60-80 billion (Barclays). This amount primarily depends on the quantity of spectrum that becomes available and assumes an average price of $2.50/MHz-POP. The total spectrum expected to be up for grabs during the auction is expected to be higher than recent FCC auctions, such as the AWS-3 auction. However, Rozwadowski believes the average pricing will be lower compared to previous auctions. He says these are due to the potentially limited role of designated entities, the limited competition created by the FCC’s decision to reserve some spectrum, limited funds from carriers that have been spending on upgrading their networks, and AT&T and Verizon already have large low-spectrum holdings.
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