Federal Communications Commission has started the second part of the 600-MHz spectrum sale in Washington DC, for which 62 bidders are expected to submit their offers for TV broadcasters’ airwaves.
The first auction is tagged incentive auction while the second phase is titled forward auction. The part one, or the reverse auction, was completed in late June.
Today, participants in the first stage of forward auction have submitted their bids in the incentive auction, including major telecoms like AT&T, Verizon and T-Mobile US, and broadcasters like Comcast and DISH, while Sprint will not be participating.
The television spectrum in the 600-MHz band, is a set of low range frequencies which have longer wavelengths, and can span longer distances between towers,aiding the carriers in reduce the number of transmitters and other infrastructure, and hence slashing costs of building networks over large areas.
The incentive auction task force chair Gary Epstein and deputy chair Jean Kiddoo conveyed that all bidders were offered ways in July to familiarize themselves with the new bidding system, including the mock auction on 11 and 12 August.
Under the reverse auction broadcasters agreed to hold 600-MHz airwaves to allot them for mobile use with the FCC also establishing the clearing cost for re-purposing 126 MHz of licensed and unlicensed spectrum, of which 100 MHz is licensed spectrum, for wireless data use.
The reverse auction ended with a sum of US$86.4 billion for the forward auction, which will have to be slashed if the regulator cannot achieve it in the second phase of the sale.
Currently, operators will have to pay around $2.15 per MHz per capita which the analysts claim to be not possible.
While broadcasters agreed upon $86 billion in June, the final payout is estimated to be half of that, and if the wireless carriers and other fail to pay it, which is a very likely incident, the FCC will revert to broadcasters for a second round of bidding.
The quoted $86 billion is more than twice the free cash flow of the entire industry for 2017, report analysts, with around $40 billion being the top sum which will be bid by carriers in the auction, with AT&T paying $10 billion, T-Mobile spending $8 billion and Verizon $6 billion. At the same time, Comcast will bid $5 billion to $6 billion, or $3 billion to $5 billion net of stations sold, while Dish could cough up over $2 billion, suggest analysts.
The wireless market famous between cable operators with strong positions in broadband, has failed to achieve similar wireless networks when compared to corresponding telecom rivals.
Dish, having already acquired a portfolio of wireless licenses over the last decade to include broadband services in its offerings, while broadcasters can sell a license and take a station off the air by moving to a different frequency or sharing a signal with another broadcaster.
The auction will have 23 stations from Spanish language broadcaster Univision, as per S&P Global Market Intelligence estimations earlier this year, with Comcast, Twenty-First Century Fox, CBS, Sinclair Broadcast Group also having possibilities of benefiting from selling their stations.
In-spite of the pros of the auction, the debts surrounding the wireless industry may put the event into jeopardy. AT&T recently acquired DirecTV for $67 billion, including debt, Verizon will buy the core business of Yahoo! for $4.4 billion and acquired AOL for $4.4 billion, last year, while the New York telecom completed the $130 billion purchase of Verizon Wireless in 2014.
With many hurdles for the telecoms and a hefty price tag of $86 billion, the auction will need multiple stages to balance and meet both the telecom and the broadcaster ends.
Vina Krishnan
editor@telecomlead.com
