Reverse Auction Ends Stage 3 With $40B Clearing Cost

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After 52 rounds of bidding, Stage 3 of the FCC’s reverse auction concluded Thursday afternoon at 3:30 p.m., eliminating the need for two further hour-long bidding sessions designed to ensure a timely end to this stage of the broadcast incentive spectrum auction.


Bidding concluded with a new clearing cost of exactly $40,313,164,425. The new clearing target is 108 MHz, representing 80 MHz of licensed spectrum.

As RBR + TVBR reported Nov. 28, Stage 3 of the FCC’s Forward Auction is expected to begin on Monday.The second stage of the FCC’s reverse auction concluded with Round 53 on Oct. 13, with a new clearing target of $54.59 billion — exactly $33.8 billion lower than the forward auction’s first stage. The clearing target had been reduced from 126 MHz to 114 MHz.

With the close of the third stage, another $14.28 billion has been shaven from a figure that began at a staggering $88.39 billion.

Even with a new clearing cost that is more than half of the original clearing cost, several more rounds of back-and-forth bidding may be seen before an agreeable clearing target is reached.

The second stage of the Forward Auction was halted Oct. 19 after just one round of bidding.

At the time, Stephan Sloan, a Providence-based broker for Media Services Group, explained that this was welcomed, as it would accelerate the process needed to bridge the gap between wireless communications companies and TV broadcasters who were over-promised a financial windfall by none other than FCC Chairman Tom Wheeler himself.

Some $21.52 billion was bid on spectrum by wireless companies in a two-hour session that concluded at Noon Eastern on Oct. 19.

A ‘MODEST MILESTONE’ IS MET IN REVERSE AUCTION

While there is still a nearly $39 billion bridge to build, Dan Hays, principal at PwC Strategy&, calls the conclusion of the third stage of the reverse auction “a key milestone in the auction proceedings.”

Hays says, “While this stage presented only a modest reduction in demand to broadcasters – moving from 114 MHz to 108 MHz – its impact on the target proceeds required to free broadcasters of their spectrum assets is much more telling for where the auction is likely to go from here.”

In fact, he believes the “relatively modest 26% reduction” in the clearing cost is a strong indication that broadcasters are unlikely to give up their spectrum at anything but premium values.

Nevertheless, participants and observers should prepare for Stage 4 of the reverse auction.

“At $40.3 billion, we believe that the cost is still far beyond the appetite of mobile network operators,” Hays says. “This makes a fourth stage of the auction a virtual certainty.”

Even more disturbing, he adds, is the notion that the large gap between the forward and reverse auctions could persist.

“This could perhaps be an early indicator of a potential eventual failure to successfully complete the auction altogether,” he warns.


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Adam R Jacobson is a veteran radio industry journalist and advertising industry analyst with general, multicultural and Hispanic market expertise. From 1996 to 2006 he served as an editor at Radio & Records.