Round 14: Spectrum Auction Bid Total Just Short of First Benchmark - Broadcasting & Cable

Round 14: Spectrum Auction Bid Total Just Short of First Benchmark

Tops $15.7 billion
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The forward part of the FCC's spectrum incentive auction continued to pick up steam Wednesday (Aug. 24), with the latest round--round 14--totaling $15,717,686,000 in bids for the 126 MHz of spectrum up for grabs. Actually, the figure that counts toward closing the auction is $15.060 billion, which is net of discounts and bidding credits for various parties including rural bidders and small businesses. (The round 13 figures were total $15,077,767,000 billion/net $14.450 billion.)

Demand continued to outstrip supply in nine of the top 10 PEAs (partial economic areas) into which the FCC has divided the spectrum licenses. Only in the Philadelphia PEA did demand not exceed supply in the latest round among those.

The auctions is also nearing one of two benchmarks for closing the auction, while the second remains a distant goal, and one the FCC may not meet.

The FCC cannot close the auction until the forward portion net amount (the above $15.060 billion) equals or exceeds the $88,379,558,704 the FCC will need to cover the cost of paying broadcasters for that spectrum, paying for the logistics of conducting auction itself, and paying for TV station relocations so those bidding in the forward auction can get access to the spectrum.

Most observers see the auction as continuing into a second stage, with the FCC lowering the clearing target once (from 126 MHz to 114 MHz), or more times, before it covers the costs. It has nine clearing targets to choose from.

But there is also another benchmark to closing the auction, which is the one that will almost surely be met in the third of today's three rounds of bidding.

In order to assure that the government is getting fair value for the licenses relative to what has been paid in similar auctions, the FCC generally sets a benchmark minimum price, in this case a formula based on multiplying "the price benchmark of $1.25 per MHz-pop, by the forward auction spectrum benchmark of 70 megahertz by the total number of pops associated with the Category 1 blocks in high-demand [top 40] PEAs [partial economic areas, which is how it divided up the 126 MHz of spectrum reclaimed]."

That comes to a total of $15,896,290,987, which means that after round 15, the FCC will have met one of its two benchmarks for closing the auction.

The FCC is currently holding three rounds of one hour apiece for forward auction bidders—62 of them are eligible—including Comcast, Dish and AT&T.

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