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FCC Sets Date For New Broadcast Spectrum Bids As Initial Offers Fall Short

Thursday, Sep 01, 2016

The FCC’s in the process of auctioning much of it to wireless broadband providers. And today it set September 13 as the opening date for the second round of bidding — after the first round ended last night with far fewer offers than it needs to meet broadcasters’ needs.

The first round ended with $23.1 billion worth of offers. Broadcasters who agreed to participate had set a threshold  — formally called the clearing cost — of $88.4 billion.

For the second round, the FCC will reduce the amount of spectrum is intends to clear from 126 MHz to 114 MHz.

As a result, “the ball is now back in the court of TV broadcasters, who will need to decide whether to accept lower prices for their spectrum or bet on future opportunities to cash in on their airwaves,” says Dan Hays, a principal with PwC’s strategy and consulting group. “We anticipate that many will choose the certainty of the auction and roll the dice in the second stage starting in the coming weeks.”

Indeed, he adds, a “halving of the total spectrum clearing cost in a second stage of the reverse auction, due to increased competition among broadcasters participating, would not be at all out of the question.”

National Association of Broadcasters is “surprised” by the first-round offers, said EVP Dennis Wharton.

“Perhaps the notion of a ‘spectrum crisis’ pedaled in Washington for the last seven years is not as acute as policymakers were led to believe,” he said. “We look forward to the second round of the auction where wireless carriers will be afforded another bidding opportunity.”

But Wall Street isn’t surprised.

Wells Fargo Securities’ Marci Ryvicker says that “no one we spoke with (including many broadcasters themselves) had anticipated this first stage netting more than $20-25 billion.”

The FCC is conducting what’s known as a forward auction: Potential buyers indicate how much spectrum they’d be willing to acquire in a community at prices the agency sets to raise the amount that local broadcasters say they need.

In the first round, demand for spectrum exceeded the supply in just two of the top 50 markets: Raleigh, NC, and Brownsville, TX.

Ryvicker says that the round ended earlier than expected, suggesting that the entire auction could be concluded by the end of 2016.

That would be good news for a couple of companies, she figures.

Dish Network has 80 MHz of spectrum and wants a partner to help develop it. That’s hard to do while everyone is focused on the FCC’s auction.

Comcast may want to develop a mobile service business and is on both sides of the auction. The cable giant is a qualified bidder, while NBCUniversal’s one of the largest TV station owners.

And Nexstar would need a waiver from the FCC to close its $4.6 billion merger with Media General while the spectrum auction is taking place. That issue “goes away,” Ryvicker said, if things wrap up by year end.

 

Source : deadline.com

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