Final Stage Auction Rule Met at $18.2 Billion

Assignment phase to follow January 18, 2017
WASHINGTON—The closing criteria of the television spectrum incentive auction have been met at $18.2 billion in bids for 70 MHz of public airwaves. The closing criteria—i.e., clearing costs plus expenses and a benchmark bid price— were finally met after 43 weeks and four separate stages targeting progressively less spectrum.

Stage 4 targeted 84 MHz, which participating broadcasters agreed to vacate for $10 billion in the fourth-stage reverse auction that ended Friday, Jan. 13. The clearing cost criteria comprised this $10 billion ask, plus the $1.75 billion Congress allocated to move broadcasters as well as the administrative costs of holding the auction, for a total of just over $12 billion.

Bidding in the fourth-stage forward auction commenced at 10 a.m. Wednesday, Jan. 18. By noon, the clearing cost criteria was met with bids totaling more than $17.7 billion from participating wireless providers, or $17.2 billion after discounts for rural and smaller entities, but still enough to cover the $12 billion. However, bids fell less than three cents short of the benchmark bid price of $1.25 per MHz/Pop (one megahertz of spectrum passing by one person in a given market area), triggering a second round of bidding.

Second-round bids totaled $18.2 billion, or $17.7 billion after discounts, and slightly surpassed the $1.25 MHz/Pop benchmark at $1.2570, for the 70 MHz available out of the 84 MHz clearing target after consideration for guard bands.

The next step involves implementation of the spectrum reserve rule in which “each Category 1 product for which at least one reserve-eligible bidder has processed demand at the time is split into two products: reserved and unreserved,” according to the Federal Communication Commission’s auction dashboard. “Reserve” refers to 30 MHz of spectrum set aside in each wireless geographic area for wireless providers who hold less than one-third of available low-band spectrum in a license area.

“In order to provide bidders with additional time to bid in the first round after the spectrum reserve has been implemented, round 3 will be extended to six hours. It will be held tomorrow, Jan. 19, from 10 a.m. until 4 p.m. Eastern.”

There will be no bidding on Friday, Jan. 20, due to the inauguration. Bidding will resume in two-hour increments on Monday, Jan. 23, at 10 a.m and 2 p.m.

The auction will close when demand no longer exceeds supply, as it now does in several wireless geographic units. Once the auction closes, an assignment phase where winning bidders of generic frequency blocks will be able to bid on specific frequencies, will begin.

Addendum: Outgoing FCC Chairman Tom Wheeler issued the following statement after the final stage rule was met:

“The world’s first spectrum incentive auction has delivered on its ambitious promise. Reaching the Final Stage Rule means the benefits of the auction are indisputable. We will repurpose 70 MHz of high-value, completely clear low-band spectrum for mobile broadband on a nationwide basis. On top of that, 14 MHz of new unlicensed spectrum—the test bed for wireless innovation—will be available for consumer devices and new services. The auction will provide $10.05 billion to broadcast television licensees who participated and billions towards deficit reduction.

“There is still a long road ahead to successfully implement the post-auction transition of broadcast stations to their new channels and bring the new wireless and unlicensed spectrum to market. This will be an extremely important task for my successor and the new commission; I wish them well.

“Now that we are assured of a successful auction, however, it is appropriate to acknowledge and thank some of those who helped us get here; a list that begins with our staff. For more than four years, Gary Epstein, chair of the Incentive Auction Task Force, has led a team of professionals more than 100 strong to assure that our actions were carefully coordinated and considered the public and stakeholder interests from all angles. The Task Force has worked tirelessly on this auction since 2012 and they have my deepest thanks.

“Congress made the incentive auction possible – both by passing the Spectrum Act in 2012 and through its continued guidance and oversight – thanks to the leadership of Reps. Upton, Waxman, Walden, Eshoo, and Pallone, and Senators Rockefeller, Thune, and Nelson. Committee staff, together with the staff of our federal agency partners, including NTIA and OMB, collaborated to draft a momentous piece of legislation designed to advance the goals of making more spectrum available for licensed and unlicensed use, funding an interoperable public safety network, and reducing the federal deficit.

“My predecessors as chair, Julius Genachowski and Mignon Clyburn, set the process in motion for this auction as well as for the 2014 AWS-3 auction, together with fellow Commissioners Robert McDowell, Jessica Rosenworcel, Ajit Pai and Mike O’Rielly. Congratulations to all on a job well done.”

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