Try, Try Again: Stage 2 Reverse Auction Concludes at $54.6B
The FCC has announced the conclusion of the Stage 2 Reverse Auction, moving the spotlight from the broadcasters willing to relinquish 114 MHz of their spectrum to the bidders in the forward auction hoping to buy it. Unfortunately for those wishing to see a speedy conclusion to the Spectrum Incentive Auction, the FCC set the cumulative buying price for 114 MHz of spectrum at $54,586,032,836, plus the cost of the $1.75B repacking fund and the cost of conducting the auction itself.
Given that forward auction bidders in Stage 1 stopped bidding at $23 billion, it seems unlikely that they will show up for Stage 2 so rejuvenated as to bid two and a half times that amount now. If they don’t, then the auction will move to Stage 3 and likely into 2017 as well. Still, $55B is significantly less than the $88B the FCC was targeting in the Stage 1 Forward Auction, confirming the FCC’s earlier assertion that the additional broadcast spectrum needed to reach the original clearing target of 126 MHz is quite expensive. While the likelihood of Stage 2 concluding the auction appears small, a 40% drop in the clearing cost, while clearing over 90% of the spectrum originally targeted by the FCC, definitely illuminates the path to where supply will meet demand. Unfortunately for many broadcasters, that point on the path is not looking like one that will bring stations anywhere close to the prices initially presented to entice them into the auction in the first place.
So while the Stage 2 Forward Auction might be anticlimactic for broadcasters looking for a highly profitable end to what seems a very long trek from the announcement of the National Broadband Plan over six and a half years ago, it will still be informative. In particular, it may settle the debate between those who believe the Stage 1 Forward Auction set the high water mark for how much the wireless industry would bring to the table for the absolute maximum amount of spectrum, and those who believe wireless bidders were holding back in Stage 1 to conceal their motivations and bidding strategies, nearly certain the auction would proceed to further stages. If the Stage 2 Forward Auction brings in less than Stage 1’s $23.1B, that trend will not be promising for a quick or profitable end to the auction for those broadcasters still willing to sell spectrum.
Of course, that could be because the wireless bidders are still confident more auction stages are coming, and will continue to hold their ultimate bids in reserve for those later stages. So it goes with history’s most complicated auction, where the more you know, the more you are left to fathom what it means.