The fourth stage of the spectrum auction began last week with some broadcasters and their allies starting to seriously wonder whether the intersection of TV stations and wireless bidders has been renamed dysfunction junction.
The auction was prompted by cries from wireless operators that the country faced something between a spectrum crunch and a crisis and with pushback from broadcasters countering that the wireless operators were overestimating the need.
The FCC has also been freeing up higher-band spectrum for wireless, which may have depressed demand, particularly given that some of that is for unlicensed, and so can be used without those companies having to pay the government anything.
The FCC has always said that the auction was about letting the marketplace decide where the higher value was in spectrum, broadcast and wireless, but the Wheeler FCC was clearly in the wireless camp.
Broadcasters were willing to give up 126 MHz of spectrum, but at a price about four times what wireless operators were willing to pay. The total is now down to 84 MHZ, but if wireless companies don’t start coming up a bit from their $22 billion bid—now a little over $19 billion with bidding discounts and the decreasing amount of spectrum—broadcasters may just keep their spectrum, get an advanced transmission standard through a Republican FCC whose current senior Republican, Ajit Pai, has called for action on that front; and stay in the business.
One thing that has not received a lot of attention is that it is possible for wireless companies to finally meet broadcasters’ offer, but the auction still may not close because two benchmarks have to be met for the auction to close. Wireless operators have to bid at least as much as broadcasters are asking (plus a couple more billion for auction and TV station moving expenses) and the bids in the top 40 markets have to meet a certain threshold price set to ensure the government was getting fair market value for the spectrum.
After the last forward auction bid, the new metric for that benchmark was not met, so that even if broadcasters came in below the wireless companies’ current price, the auction might not close after the forward auction bidding if the price in the top 40 markets was not high enough to meet that fair market price benchmark.
The auction may have been set up for multiple rounds, but the more rounds it goes, the less successful it has been in freeing up spectrum for wireless and the longer broadcasters have to put their future plans on hold until they know just what that future will be.