2.5 GHz Auction Could Struggle to Hit $300M
The 2.5 GHz auction is limping along and seems unlikely to hit the $3.4 billion New Street had projected, and could struggle to hit $1 billion. The auction was at almost $160 million after 13 rounds Monday, with numbers growing at a glacial pace. The auction is expected to be the last of mid-band spectrum for 5G for several years.
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The record-setting C-band auction was at $5.4 billion after 13 rounds and was growing at this stage in the auction close to $500 million per round. The smaller 3.45 GHz auction was at $1.9 billion, adding almost $200 million per round. The 2.5 GHz auction opened at $103.5 million July 19 and has increased only $57 million since.
Questions remain whether the FCC will be able to finalize licenses won in the auction after expiration of FCC auction authority Sept. 30. FCC Chairwoman Jessica Rosenworcel noted potential concerns Friday (see 2208050023).
On the positive side, the Inflation Reduction Act reconciliation package was changed over the weekend (see 2208080062) to remove taxes on carriers' spectrum deployments. CTIA President Meredith Baker highlighted the need for that change at a Senate Commerce Committee hearing last week (see 2208020076).
New Street’s Jonathan Chaplin said the tax change would have meant the value of the 2.5 GHz band would “plummet” as the major carriers and Dish Network saw billions of dollars in free cash flow wiped out.
Recon Analytics’ Roger Entner told us Monday the auction numbers will be low. “For large results, you need attractive spectrum with multiple bidders who are willing and able to bid,” he said: “Here T-Mobile is the only one who fits that bill” and “will get the spectrum on the cheap.”
“This was an unusual auction selling overlay licenses that had encumbrances and that did not cover the entire country” and “I did not want to make any predictions of how this auction would go other than stating that it would not be a large revenue generator for the Treasury,” emailed Sasha Javid, BitPath chief operating officer. “Given the excess demand remaining after 11 rounds, if we use prior FCC auctions as a benchmark, this auction will struggle to reach $300 million,” he said: “We have a long way to go given the large number of products, so I hope this auction will defy past precedent. That said, a billion dollars would be a stretch at this point.”
The auction offers licenses that “sort of fill in different pieces here and there,” FCC Commissioner Brendan Carr said Friday. “We have to take into account when people are setting their expectations,” he said: “It’s not like a nationwide C-band auction. … It’s not like a green-field spectrum band. I do think that we need to get more nationwide spectrum out there for 5G.”
The auction hasn’t been without intrigue. Javid noted a “significant drop in demand” in round six last week. There were demand reductions in large counties like Miami-Dade, Connecticut's Fairfield and New Haven and California's Ventura, and “quite a few counties in Colorado,” he said at the time. “I will leave it to others to speculate which bidder was reducing its demand,” he said, suggesting Dish as a possibility. Demand stabilized in the following round.