Round 15: Bidders KO 1st Auction Benchmark

But, early in proceedings, second remains a distant goal
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After 15 rounds and eight days, the forward portion of the FCC's spectrum auction has met one of two benchmarks for closing the auction. With $16,391,244,000 bid in the latest round (which translates to  a net $15.730 billion minus bidding credits and discounts), they have exceeded the $15,896,290,987 total the FCC set as the minimum bid price at this clearing target and all clearing targets above 84 MHz.

The round 14 numbers were $15,717,686,000 total and $15.060 billion net.

But that round 15 net $15.730 is still many billions of dollars short of what the FCC will need to close the auction without having to move to a second stage of broadcast bidding.

That second benchmark is the $$88,379,558,704 the FCC will have to raise for the spectrum 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.

The auction is expected to last a couple of months, so there is plenty of opportunity for that total to continue to rise, particularly given that the FCC is raising the price on the spectrum blocks by 5% a day and requiring bidders to use 95% of the bidding credits they have committed to, though not necessarily on any particular spectrum in any particular market.

If, as most observers speculate, bidders--including Comcast, Dish and AT&T--do not pony up enough to meet that second benchmark at the 126 MHz clearing target in this, stage one, of the auction, the FCC will lower its sights to 114 MHz, pay broadcasters less in a continuation of the reverse auction, and hope to cover that lower figure in a new forward auction.

The FCC has set nine spectrum-clearing targets ranging from the current high of 126 MHz to 42 MHz--depending on how the marketplace values the spectrum.

In spectrum auctions, the FCC traditionally sets some benchmark spectrum price it will accept. This one was calculated by multiplying the target price for a unit of spectrum, in this case $1.25 per unit (called "MHz pops"), by 70 MHz (how much spectrum would be sold with an 84 MHz clearing target [some of the spectrum in all the targets won't be sold but

is reserved for guard bands]), by the population covered by the category 1 blocks (those with the least impairment due to interference) in the top 40 PEAs (PEAs are the geographically-based partial economic units the FCC has divided the spectrum into).

At clearing targets below 70 MHz, that $15,717,686,000 benchmark will be reduced since the 70 MHz multiplier will decrease.

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