Forward Auction Halted After Just One Round


By Adam R Jacobson

Just as soon as it started, activity in the second stage of the FCC’s forward auction came to a screeching halt.

With just one two-hour trading session held Tuesday yielding tepid bidding from wireless communications companies, the Commission pulled the plug on further rounds, effectively ending the second stage of the forward auction much sooner than many had expected.

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

Now, the incentive auction moves to a third round, as a lower clearing target is sought.

The FCC expects to release a public notice next week announcing details about the next stage, including the clearing target for Stage 3, and the time and date at which bidding in Stage 3 of the reverse auction will begin.

Stage 2 of the Forward Auction opened with a clearing target of $56.54 billion for 90 MHz of licensed spectrum. In Stage 1, some 100 MHz of licensed spectrum was up for bid.

This shows that wireless companies and TV broadcasters are some $35 billion apart on spectrum valuations.

RBR + TVBR analysis of bidding in Round 1 of Stage 2 of the Forward Auction concludes that little, if any, activity was seen in any of the Top 40 markets.

In Raleigh, the clock price of $8.98 million was made, a rise from the round opening price of $8.552 million.

Bidding was also seen in Louisville, Knoxville, Albuquerque and Reno, among other small to medium-sized markets.


For PwC Strategy& principal Dan Hays, the “rapid close” of the forward auction’s second stage “shows just how delicate the balance of supply and demand is for the 600 Mhz spectrum in question.”

Unlike the first stage of the auction, which saw a gradual decrease in demand over multiple rounds, the demand profile in the second stage’s single, forward round “fell off quite rapidly,” he notes. “Based on the pattern, this could well indicate the sudden exit of one nationwide license being sought, as demand in nearly every major market fell simultaneously from 10 licenses to nine.”

The lack of upward motion in the total forward auction proceeds may be disheartening to many broadcasters, who were eagerly awaiting a further narrowing of the gap after reducing their own clearing cost by over 35%. However, Hays says, “it is important to remember that this is all taking place very much by design; the auction is working as planned in an attempt to find a level of spectrum clearing where supply matches demand.”

Meanwhile, NAB EVP/Communications Dennis Wharton said his organization is surprised by the results of wireless carrier bidding and that broadcasters look forward to the third stage of bidding, and a successful completion of the auction.

Access to the Auction System for Stage 2 will be available until 5:00 pm Eastern Thursday (Oct. 20).