Second stage of 600MHz auction comes to an end after bidders fail to meet target price

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Last week, the FCC lowered the clearing cost of the 600MHz spectrum auction to get it closer to the price offered by the bidders. Now that cost must be lowered again.

The FCC has revealed that the bidders in the 600MHz auction offered just $21.5 billion. That number is less than the $54.6 billion cost that the FCC set last week and a far cry from the original $86.4 billion clearing cost.

Now that the second stage of this auction is over, the FCC will go back to the TV broadcasters to begin stage three. It’ll work with these broadcasters, likely reducing the number of 600MHz licenses that it’ll acquire from them and lowering the amount that it’ll pay once again. Then the FCC will go back to the bidders to see what kind of offer it gets from them.

This second stage came to an end quickly, much faster than the first one did. We’ll have to wait and see how quickly the third stage goes, but given how far apart the FCC’s clearing cost and the bidders offer were in stage two, the third stage could be another quick one unless the FCC can get much closer to the bidders’ offer.

Via: FierceWireless
Source: FCC

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  • Aleks

    And you would think that Verizon and At&t would go all out to horde this spectrum. Seems to me like they are limiting how much they actually want to spend but with the intention of making it out of reach from the hands of T-Mobile. In other words, the play call is, “get the spectrum for as cheap as you can, as long as T-Mobile cannot reach any of it, then sell again in pieces.” Those bastard’s……..

    • a d00d

      Both carriers have so much old equipment that has to be upgraded that I doubt they could afford to do that. VZW has cash thanks to selling off assets (mostly landline to Frontier), but nothing like, say, Apple or Google. AT&T just bought DirecTV and I just learned tonight they may buy or merge with TimeWarner (NONONONONONO!!!!).

      Sprint has no money, Dish (Charlie Ergen) continues to hoard spectrum as an asset, and the word (not shown in the article above, but since then) is that Comcast may have withdrawn from the auction process. Besides T-Mobile, who does that leave left?

      • Aleks

        I heard about At&t trying to merge with Time Warner aka Warner Brothers and Co. This is getting out of hand. The government needs to keep these mergers in check or we as consumers will see prices Iover inflated by the millions. It’s a bad prospect.

      • FryChickenIsha

        Time Warner is now Spectrum. I received a letter last month. Now, on my TWC Wifi finder app it says Spectrum.

    • John Wentworth

      Honestly Verizon doesn’t really need this spectrum all that bad and AT&T only needs it in some places. Verizon and AT&T build their network on low band spectrum and they both have it nationwide. This spectrum is used in increase coverage nowadays, not speeds.
      What AT&T and Verizon (to a lesser extent) needs is mid to high band spectrum for increased capacity these days, I don’t think they are spending as much on the 600 Mhz auctions as your expecting.

      T-mobile and Sprint (though it doesn’t seem to notice it) as well as smaller operators are really the ones who need this spectrum to increase coverage and they are trying to get it as cheaply as possible. That’s my take on it.

  • Adam

    There is no reason to think cellphone service providers and TV service providers will reach price agreement after a third round. You can look at this as cell service providers do not have enough insensitive to buy the spectrum, or TV service providers do not have enough intensive to sell. Either way, I don’t see this sale happening.

    • kpb321

      This was to be expected. The FCC started off by going to the TV Broadcasters and trying to get as much spectrum freed up as possible. This naturally lead to a very high price as it included broadcasters who didn’t really want to move so just asked for a lot or who it would cost a lot to move. On the other hand there was 126 mhz in the first round and 114mhz in the second round which is quite a bit of spectrum available for the bidders so they weren’t required to bid heavily to get what they wanted.

      With Sprint sitting out the auction the first rounds had enough spectrum for each of the other three major carriers to get a ~20×20 block if they wanted it which is quite a bit. After another round or two that will start getting tighter and the bidding will start going up.

      I’m not sure if we will see things meet up on the 3rd round but I expect by the 4th or 5th round we will get there. Either way the FCC will keep going through the process until the two sides meet.

      • michael pettengill

        Why will bidding go up when the product being offered is going down?

        The product offered decreased by 10% in a number of markets and winning bidders in round 1 dropped out in round 2. The rules do allow a few passes, but you can’t sit out long and then jump in and try a “steal” at the last minute like ebay.

        • kpb321

          Supply and demand. Right now the supply is so high that the carriers can bid relatively low amounts and still get what they want from the auction. As the supply goes down the will have to spend more to get what they want.

          The first stage was 86.4B ask with 23B in bids. This stage was 54.6B ask and 21.5B in bids. The asking price fell a lot quicker than the bids did and there is still a plentiful amount of spectrum available. ~60k off between the ask and bids in the first stage while only ~30k in the second stage. They closed half the difference in one stage.

          T-mobile has said they could spend 10 billion on this auction if needed but doesn’t think it will need more than 1-2 billion.

  • SirStephenH

    “The FCC has revealed that the bidders in the 600MHz auction offered just $21.5 billion.”

    That’s less than double what T-Mobile’s taking to the table. At this rate they’ll be able to get a nice chunk of spectrum, even nationwide, if they choose to.