FCC: 62 Applicants Qualified to Bid for TV Spectrum

July 15, 2016
WASHINGTON—The Federal Communications Commission today announced that 62 applicants will be bidding for TV spectrum in the forward incentive auction. The FCC Public Notice indicated the forward auction will begin Aug. 16, 2016.

The list of the willing includes Cellco Partners d/b/a Verizon and AT&T, as expected, plus a host of regional and rural wireless providers, including East Kentucky Network in Ivel, Ky.; Iowa RSA 2 Limited Partnership, NE Colorado Cellular, Inc., and Northeast Nebraska Telephone Co. Many of the smaller entities will receive bidding credits, which amount to a discount on spectrum. Of the total 62 applicants, 19, or 30 percent, received a bidding credit related to rural service or a small-business revenue threshold.

These bidding credits are described in the Forward Auction User Guide. A bidder who qualifies for a rural service credit receives a 15 percent discount on “a winning bidder’s bid.” Bidders who qualify for the small business discount get either a 15 or a 25 percent discount off whatever price at which they may win spectrum.

For example, if Iowa RSA 2 Limited Partnership, which has a rural service bidding credit, wins a block of spectrum in Des Moines at the minimum opening bid price of $1,850,000 (as defined in Appendix F of the upfront payments Public Notice), then Iowa RSA 2 Limited Partnership will have to pay only $1,572,500 for the block of spectrum in Des Moines. These discounts are capped at $10 million for rural service providers and $150 million for small businesses in all but small markets, where the cap is $10 million.

Of the 62 qualified bidders, 13 will receive the rural service provide bidding credit of 15 percent. Another 12 bidders listed their revenue range at less than $20 million. Two more still listed revenues at between $20 million and $55 million. These 62 bidders must lay out $86.4 billion to cover the cost of spectrum sold by broadcasters in the forward auction, plus $1.75 billion to move displaced broadcasters, and another $207 million for the FCC’s administrative costs—chiseled down from a previous estimate of $226 million.

The forward auction system will become available to the 62 qualified bidders on Tuesday, July 19. It will include files on impaired spectrum where interference is expected. The commission has said that it reached its 126 MHz clearing target with 99 percent of spectrum unimpaired.

The FCC will conduct forward auction practice the week of July 25-29. Two scenarios will be covered—one in which the final stage rule of auction is met, and the other, if it is not and an extension round is needed. (See, “FCC Releases Forward Auction Bidding Guide,” July 13, 2016.) During the practice auction, bidders will not be bidding on the spectrum they’ll be vying for in the live auction. The idea is to get comfortable with the system. A mock auction, more reflective of the live event, will be held Aug. 11-12.

“The scenarios that will be used for the practice auction are designed so that within several rounds of bidding, bidders will experience key forward auction events or benchmarks,” today’s Public Notice states.

Today’s PN also was accompanied by a list of bidding applicants who did not qualify to participate, many of whom are listed by individual names.

Also see...
Q&A: Strategy& Dan Hays on Auction Price Point Divide”
Given this, an outlay of $86 billion seems highly unlikely at this time. To put it in perspective, this is two to three times the typical annual capital spending of the industry. That’s an awful lot to bite off in one big chunk.

For comprehensive coverage, see our Spectrum Auction silo.

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