FCC To Release Incentive Auction Status Update Before March 29 Broadcaster Deadline

AT&T, T-Mobile and Verizon have indicated they plan to bid, though they've had little to say of late and are constrained on making additional comments by the current quiet period for auction participants. Comcast (see 1602030025) and Dish Network (see 1602180051 and 1602190003) also have indicated they might jump in. There are questions about Dish’s balance sheet and Comcast is likely the most interested in buying spectrum in spot markets but won’t be a national player, said industry lawyers and analysts. Some financial firms have hinted they may bid with an intention beyond flipping the licenses on the secondary market, analysts said.

“It doesn’t feel like there’s a ton of momentum behind forward auction participation,” said a broadcast industry lawyer. “Everyone is seemingly cautious. Google (see 1602160036) is out. People are playing up speculators right now.” Broadcasters have concerns over how many carriers will play in the auction, the lawyer said. Analysts have dropped their predictions of the auction's size, from as much as $85 billion to closer to $30 billion, the lawyer said. “Whether the forward auction revenues will cover the reverse auction at the higher clearing targets, that’s sort of the question right now.”

Jim Patterson, analyst at Patterson Advisory Group, expects “mild” success. “There will be small pockets of hyperactivity, but I anticipate that interest will be strongest in California as well as in Georgia, Florida and Texas,” Patterson said. “Comcast will drive part of this interest as it overlaps with their cable footprint, but I think that each of the wireless carriers, especially T-Mobile in the upper Midwest, will be actively bidding. Dish will be present, but will not have as much influence as they did in the last auction.”

Broadcaster expectation is the big wild card, said Roger Entner, analyst at Recon Analytics. “As this is a delicate dance between prospective buyers and potential sellers, we can only determine success during the auction when the parties have to put their money where their mouth is,” he said. “Comcast will probably bid to repeat their successful AWS-1 endeavor. Even though it never launched service, it profited handsomely from holding the spectrum and then selling it to Verizon.”

FCC Victory Declaration?

“Absent catastrophic failure of the auction software or some other calamity, I expect the FCC will declare the auction a success no matter how the bidding goes, which is something that can’t be predicted with certainty in advance,” said Fred Campbell, director of Tech Knowledge. Campbell oversaw the 2008 700 MHz auction as Wireless Bureau chief. “Auction prices could fall short of analyst’s expectations, as some have predicted, or a dark horse bidder could push prices above initial expectations,” he said. “Either way, the level of broadcaster participation, not auction prices, is the most important metric for success in this auction. So long as enough spectrum is made available to meet the needs of mobile carriers for providing service to the public, the auction should be considered a success from the perspective of consumers.”

“Something would have to go horribly wrong for this auction to not be a success,” said Doug Brake, telecom policy analyst with the Information Technology and Innovation Foundation. “The incentives underlying the incentive auction are strong, certainly strong enough to overcome any imperfections in the auction design.” How many nontraditional players will jump in is a big question, Brake said. “This is the last big opportunity for low band spectrum on the horizon, which will continue to be of strategic importance for coverage and control as LTE evolves into 5G,” Brake said. “That said, I don't expect big participation by wildcards.”

“All signs indicate that there will be enough participation on both the sell and buy sides for a successful auction,” said Michael Calabrese, director of the Wireless Future Program at New America. The big question is whether AT&T, T-Mobile, Verizon and new entrants "will be willing to pay prices high enough to justify clearing broadcasters from spectrum below channel 37, which is reserved for radio astronomy and other uses," he said.

T-Mobile “desperately needs” low-band spectrum to compete effectively, which is why the 30 MHz spectrum reserve is critical, Calabrese said. “There is also a strong rationale for Comcast to bid,” he said. “Any cable company acquiring low-band spectrum would have the option to super-charge a Wi-Fi-first mobile broadband offering, although probably in partnership with a second-tier carrier.” Combined with its Wi-Fi hot spots and wireline backhaul, “Comcast could offer a far more competitive version of what Google is doing with its Project Fi partnership, which relies on Sprint and T-Mobile as a back-up to Wi-Fi-first connectivity,” Calabrese said.

“The FCC has worked hard to ensure a successful auction, and if competitive carriers get access to the low-band spectrum for the benefit of competition and consumer choice, then yes, the auction should be deemed a success,” said Steve Berry, president of the Competitive Carriers Association. “The FCC must ensure that carriers get access to the spectrum in the short term.” A new study supports CCA arguments that the repacking can be completed within 39 months (see 1602180063), Berry said. “The incentive auction is of the utmost importance to competitive carriers and consumers alike.”