H-Block Auction Off to Slow Start in Early Bidding Rounds
The FCC’s H-block auction opened Wednesday and got off to a slow start. While more rounds will play out in coming days, some observers said it already appears most likely that the ultimate outcome will be Dish Network’s buying most of the spectrum, under its commitment to the FCC last month to bid nearly $1.6 billion for H-block licenses (CD Dec 23 p1). Dish was the only company that qualified with the FCC to make a nationwide bid for the band.
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Through the first two rounds of bidding, the FCC said 78 of 176 licenses had received provisionally winning bids for a total of $203 million so far. The highest bid was $45 million for the Economic Area license covering New York City and the surrounding area, which was short of the required $54.1 million bid. Each of the licenses provides 10 MHz of spectrum, located adjacent to the PCS band already widely used by carriers. The auction is the first that will help pay down the $7 billion cost of launching FirstNet (CD June 28 p1).
Auctions can take a long time. The last major spectrum auction, the 700 MHz sale in 2008, played out over 38 days and 261 bidding rounds. The FCC does not disclose the identity of which company bid how much for each license until the auction is complete.
"We think DISH is the most likely winner,” New Street Research said in a research note. “We will be watching to see how much above their $1.6BN reserve bid they will have to pay (we don’t think it will be much more)."
Industry lawyers told us Wednesday all the focus is on Dish. “From everything I hear, the auction will just end up with Dish’s bid because they likely overpaid,” said a former FCC legal adviser. “The fact that the FCC put up this small slice by itself guaranteed a yawner of an auction,” said a former FCC spectrum official. “The only drama is when Dish will enter with its FCC-mandated bid.” Commissioner Jessica Rosenworcel had argued that instead the FCC should have packaged the H-block with other spectrum for a later auction. During a discussion at CES, her position got some support from Commissioner Mike O'Rielly, who was not on the FCC when the H-block auction order was approved (CD Jan 10 p1).
But a wireless lawyer said it’s too early to say Dish will be the only player in the auction. “Some participants seem to believe that this is the first, and a less expensive, spectrum opportunity to come along in five years, and might be a good investment,” the lawyer said. “Given the mix of bidders, however, there should be a range of perspectives and bidding strategies, including some bidders interested in specific rural and urban markets, and some interested in a more nationwide approach.”
Commissioner Mignon Clyburn welcomed the start of the auction. “To say that a spectrum auction is long overdue is an understatement,” she said (http://fcc.us/1g1ovHR). “This will be the FCC’s first major auction since 2008, and it comes at a time when the commercial market and consumer demand for mobile wireless services are skyrocketing. This auction has revived spectrum which not too long ago was forlorn. The 1915-1920 MHz and 1995-2000 MHz bands have been designated for auction for nearly a decade, but were mired in difficult interference disputes.”