After the FCC increased the round-by-round bid increments yesterday for the new mobile broadband blocks being offered in the forward auction (where wireless companies bid for spectrum which TV broadcasters had agreed to vacate in the initial “reverse auction” phase of the incentive auction), bidding slowed down considerably, and in just six rounds, Stage 1 of the forward auction was declared over yesterday afternoon. Bidding in the Stage 1 forward auction netted $22.45 billion, far short of the $88.38 billion needed for the auction to close in this stage. As we’ve written before (see our presentation on the incentive auction process, here), for the auction to “close,” the wireless bidders must bid more in the aggregate for the spectrum that they are buying in the forward auction than the FCC promised to pay broadcasters to vacate their spectrum (plus the repacking costs and the administrative costs of conducting the auction itself). As that did not happen, what is next?
This much we know so far:
- The FCC previously said that, for Stage 2 of the incentive auction, it would reduce the spectrum clearing target by one level (to 114 MHz). This will increase the size of the post-auction TV band and make it feasible for the FCC to repack more TV stations than was the case in Stage 1 – meaning that in Stage 2, the FCC will be able to reduce the prices it offers to some (but not necessarily all) of the TV stations still in the reverse auction, and the total cost to clear TV stations will drop. It also means that, in most markets, Stage 2 of the forward auction will have one fewer block of available spectrum (9 blocks instead of 10) for which the wireless bidders will compete after the completion of the reverse auction portion of Stage 2.
- Bidding in Stage 2 of the reverse auction will begin not sooner than Wednesday, September 7th, but the FCC will release a public notice with more details.
So the auction process will continue for at least several more weeks. While the auction continues, broadcasters need to remember that they still are bound by the FCC’s rules on prohibited communications. Thus, even if a station has dropped out of the auction, the broadcaster cannot reveal that fact until the auction is complete. For more on the prohibited communications rules, see our post here.