Auction Gavel Lands With a Thud

Final score: TV station winners will take home $10 billion, far short of initial ask

Broadcasters finally know two things about the spectrum incentive auction: It will end after stage 4—in days or a couple of weeks—and their payout will be $10,054,676,822 for 84 MHz of spectrum. Wireless companies will get 70 MHz, with the rest going to buffer bands and unlicensed.

Wireless companies and other forward auction bidders were continuing to bid up that 84 MHz of spectrum last week to $18.3 billion at presstime. But the way the auction was structured, anything over broadcasters’ ask, after $1.9 billion for auction expenses and the post-auction repack, goes to deficit reduction. So while that spectrum appears to be worth closer to $20 billion, broadcasters’ payout is fixed.

That $10 billion is a fraction of the broadcasters’ initial ask of $86 billion, though that was for 126 MHz.

While wireless companies complained of anywhere from a spectrum shortage to a crisis in calling for the auction, they were not willing to pay the $86 billion, or the decreasing asking prices for 114 MHz or 108 MHz. Instead, they simply held to their prices, reduced their demand, and waited for the prices and spectrum amounts to drop.

There has been some speculation that the FCC reduced the likelihood of big payouts for broadcasters or the government by holding the auction too close to the AWS-3 auction that also freed up low-band spectrum for wireless, and by opening up new, higher-band, spectrum for unlicensed, which may also be able to be used for next generation wireless and is free.

“A full post-mortem will take time,” said Preston Padden, former executive director of an auction-interested TV station coalition. But Padden suggested “shifting carrier priorities” was one of the factors that “led to a result that was less than it could have been.”

One thing that reducing the spectrum cleared from 126 MHz to 84 MHz has done is make it easier to repack TV stations following the auction, with fewer stations having to move. No TV stations will have to be located in the buffer bands between wireless uplink and downlink spectrum, for example, or in any part of the wireless band, which will reduce the chances of cross-service interference.