The FCC’s forward spectrum auction on Wednesday evening hit its first benchmark, but analysts have indicated the proceedings are still far from over.
At the close of Round 15, the auction cleared its first final stage target of $15.9 billion in auction proceeds with a total of $16.4 billion in actual proceeds.
However, bidding remained pitifully short of the satisfying the second final stage price target of $88.4 billion in net proceeds, coming in at just $15.7 billion.
Though there is no limit to the number of bidding rounds in the forward auction and bid prices are rising five percent each round, analysts have been skeptical carrier bids will hit the $88.4 billion mark in one stage.
Dan Hays, a Principal with PwC’s Strategy& consulting group, said hitting the first FCC benchmark was an important milestone for the auction but noted there is still likely a long way to go before the auction is over.
“Satisfying the first component of the auction’s final stage rule is an important waypoint en route to a successful auction outcome,” Hays said. “In crossing this hurdle, the auction demonstrates that it can at least meet the minimum price per unit of spectrum required by the auction rules. Despite this achievement, the auction remains far from finished. We still expect that a second stage of both the reverse and forward auctions – at a minimum – will be likely required to satisfy the second component of the final stage rule and cover the full proceeds and costs of the auction.”
Over the remaining course of the first round, Hays said growth in auction proceeds is expected to taper off. Though there’s no way to tell for sure, Hays said Stage 1 of the auction could come to an end as early as the beginning or middle of September.
Hays’ comments are in line with predictions from BTIG’s Walter Piecyk, who earlier this week said the proceedings could enter into a Stage 2 reverse auction as soon as early October.
Piecyk said it could take around four stages for the net proceeds target set by the reverse auction to drop low enough for forward auction bidders to meet. The amount of available spectrum would drop to 70 MHz by the fourth round.
If the auction does run into a fourth stage, Piecyk said bidding in the final forward auction could run into March 2017.
As of Thursday morning, bidding in the top three markets remained strong, with aggregate demand for spectrum holding at well more than double the available amount in all three markets.
Filed Under: Telecommunications (Spectrum)
