FCC Preps Bidders for Tuesday's TV Spectrum Sale

62 bidders line up for $86 billion in airwaves August 10, 2016
WASHINGTON—Two-fifths of the nation’s over-the-air TV band is going on sale next week for conversion into wireless broadband networks. The TV spectrum incentive forward auction commences Tuesday, Aug. 16 at 10 a.m. ET.

The forward auction follows an earlier reverse auction in which broadcasters offered to relinquish a total of 126 MHz for $86 billion. Now the 62 qualified bidders in the reverse auction must commit to bids collectively covering that amount, plus another $1.75 billion to move displaced broadcasters, and a smaller sum to cover the administrative cost of holding the auction.

The spectrum for sale is divided nationwide into 10 paired blocks of 10 MHz each, with 5 MHz accommodating uplinked data traffic and 5 MHz accommodating downlinked traffic. The remaining 26 MHz will comprise buffer zones between these traffic lanes as well as between broadcasters at lower channels and wireless providers at higher ones.

The spectrum is further divided for auction into Partial Economic Zones, or PEAs, which are used to define spectrum boundaries for wireless carriers the way designated market areas define broadcast TV markets. The United States is divided into 416 PEAs. Not all 416 PEAs will have 10 paired blocks, and some may have areas of interference from TV stations reassigned to channels in spectrum redesignated for wireless broadband.

Interference is used to determine “impairment categories.” Category 1 refers to spectrum with impairment to between zero and 15 percent of the covered population. Category 2 refers to spectrum blocks with 15 to 50 percent impairment. Spectrum blocks exceeding 50 percent impairment will not be sold.

Of the 4,048 spectrum blocks up for auction across all PEAs, 4,030 are Category 1 and 18 are Category 2. (Of the 4,030 in Category 1, 3,999 have zero impairment, according to FCC data.) Bidders who win impaired spectrum will get a percentage discount off the “final clock phase price” equal to the amount of impairment.

“For instance, if the final clock phase price is $100,000 and the license is 10 percent impaired, then a bidder that does not qualify for a bidding credit will get a discount of $10,000,” the FCC’s Forward Auction Clock Phase Tutorial states.

Bidding credits also represent a discount on a winning bid. There are two kinds—one for small businesses and the other for rural service providers. The small business discount of 15 to 25 percent is capped at $150 million. The rural service provider bidding credit is 15 percent and capped at $10 million. The discount across all PEAs with populations of 500,000 or less—PEAs118-416, excluding 412—is capped at $10 million. According to the list of qualified bidders, 19 qualify for a discount.

The initial license term of the redesignated spectrum will be 12 years, with renewal in 10.
 
The commission will conduct a mock auction Thursday and Friday, Aug. 11 and 12, in which the bidders can jump in and test the system.

The commission said information about bidding results would be available to the public throughout the forward auction on its Public Reporting System. The system will show the schedule of bidding rounds as well as progress toward meeting the two requirements of the final stage rule that determines whether the auction will close at the current clearing target. The first requires the auction results to reflect competitive pricing of about $1.25 per MHz/pop, or population, on average, across the top 40 PEAs, which translates to roughly $16 billion. The other requirement is that the proceeds cover the $86 billion provisionally raised in the reverse auction, plus broadcaster relocation and auction expenses; so around $88 billion. Gross proceeds will be posted after each auction round.

“Unlike the reverse auction, in which there is a limited number of possible rounds, forward auction bidding rounds for a stage can continue without limit so long as demand outpaces supply for any product,” the commission’ Gary Epstein Chair, Incentive Auction Task Force chair, Gary Epstein, and deputy chair, Jean L. Kiddoo, said in a blog post. “As such, we cannot predict when the forward auction will conclude.”

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Also see our Spectrum Auction silo, and...
July 15, 2016

FCC: 62 Applicants Qualified to Bid for TV Spectrum
The FCC today announced that 62 applicants will be bidding for TV spectrum in the forward incentive auction.

June 29, 2016
126 MHz Cleared at $86 Billion
The first reverse stage of the TV spectrum incentive auction has concluded, with a clearing cost of $86,422,558,704.

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