Incentive Auction Stage 1 Falls ($66 Billion) Short of the Target—On to the Next One!
You can almost hear Agent Maxwell Smart’s trademark “Missed it by that much!” The FCC quietly announced just after C.O.B. today that “[b]idding in the forward auction has concluded for Stage 1 without meeting the final stage rule and without meeting the conditions to trigger an extended round. The incentive auction will continue with Stage 2 at a lower clearing target.”
When the FCC wrote in its 2014 Spectrum Auction Report and Order that “[w]e are designing the forward auction for speed, so that reverse auction participants need not await its outcome for week or months,” it wasn’t kidding. The forward auction took just two weeks to conclude, but only because it yielded a highly disappointing $23.1 billion (netting $22.5 billion after auction discounts), a mere quarter of the $88.4 billion the FCC was targeting. The result is surely disappointing for those intent upon repurposing a big chunk of TV broadcast spectrum for what we were told was an insatiable appetite for mobile broadband spectrum, but even more so for broadcasters that had been told by the FCC that their spectrum was far more valuable for purposes other than broadcasting.
So what’s next? The FCC’s Public Reporting System states that a public notice is on the way, which will announce “details about the next stage, including the clearing target for Stage 2, and the time and date at which bidding in Stage 2 of the reverse auction will begin.” Given the large mismatch between the amount of spectrum sought by the FCC in Stage 1, and the rather paltry demand revealed by Stage 1, the FCC will have some thinking to do about how many stages of the auction it is willing to endure to achieve equilibrium between spectrum supply and demand.
In the meantime, broadcasters remain subject to the FCC’s rules prohibiting certain communications (a/k/a the “quiet period”) until the FCC releases a public notice announcing the successful completion of the auction. It looks like that may be a while.