U.S. FCC's Incentive Auction Witnesses Stepped-Up Bidding
Zacks Investment Research | Jul 18, 2016 06:50AM ET
Last Friday, the U.S. telecom regulator, the Federal Communications Commission (FCC) declared that its ongoing 600 MHz low-band wireless spectrum auction, popularly known as -- Incentive Auction -- has received as many as 62 applications. All 62 bidders have made upfront payments. The Incentive Auction, which was kicked off by the FCC on Mar 29, 2016, recently completed its first part.
In the first part, which was essentially a reverse auction, the airwaves were freed by TV broadcasters who no longer had any productive use of the same. The TV broadcasters had agreed to free a substantial amount of 126 MHz of spectrums for a massive $86.4 billion.
In the second part of the auction process, the FCC will resale these airwaves to wireless operators, cable MSOs (multi-service operators) or tech firms through competitive bidding. The second part is known as forward auction. Needless to say, the total bid price of the forward auction must reach at least $86.4 billion for the Incentive Auction to be successful. The second part of the Incentive Auction is likely to start from Aug 16, 2016.
Important bidders include national telecom giants like Verizon Communications Inc. (NYSE:VZ) , AT&T Inc. (NYSE:T) , T-Mobile US Inc. (NYSE:T) , satellite TV operator DISH Network Corp. (NASDAQ:DISH) and cable MSOs (multi service operators) such as Comcast Corp. (NASDAQ:CMCSA) and Liberty Global (NASDAQ:LBTYA) Inc. Low-band spectrum is crucial for wireless operators as the signals can be transmitted over longer distances and through brick-and-mortar walls in cities.
However, several industry experts believe that telecom operators may be reluctant to offer such a hefty sum for low-band airwaves. Some industry watchers have also predicted that telecom operators may need around 70 MHz to 80 MHz of spectrums in the 600 MHz bands instead of the total freed up 126 MHz airwaves. In such a scenario, the FCC may have to conduct another round of reverse auction for a reduced volume of spectrum at lower prices.
The FCC was initially hopeful of completing the Incentive Auction process by the end of the third quarter of 2016. However, industry watchers are now expecting it to be much more prolonged and may continue till early 2017. Notably, the freed spectrums cannot be utilized commercially before 2020.
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