FCC Forward Auction Headed Into Stage 2 with $54.6B Price Target

Bidding in the FCC’s Stage 2 reverse auction came to a close Thursday, setting a new $54.6 billion price target for forward auction participants.

The figure represents the price tag broadcasters put on opening up 114 MHz of prime low-band spectrum for wireless use. The number is more than $30 billion – or nearly 40 percent – less than the $86.4 billion target for 126 MHz set in Stage 1, and falls on the low end of analyst predictions.

Prior to the announcement, BTIG’s Walter Piecyk forecast the bar would be set at between $50 billion and $65 billion.

According to PwC Strategy& Principal Dan Hays, the steep drop is evidence of an effective auction process in action, but noted the $54.6 billion figure may still be above the reach of forward auction bidders.

“The significant reduction in the targeted net proceeds of the reverse auction shows just how effective the auction mechanisms can be in bringing together supply and demand,” Hays said. “However, at over $54.5B to broadcasters, or roughly $56.5B in total, we believe that the clearing cost is still well beyond striking distance for the budgets of mobile network operators. A third stage of the auction, and perhaps even a fourth, is now all but a certainty. For broadcasters, this is a clear indication of a rapid decline in interest at lower prices, effectively calling the bluff of the wireless industry and demanding that they come to the table ready to pay up.”

The striking distance for operators Hays refers to could amount to as little as $33 billion, according to Bloomberg estimates earlier this year. If those predictions pan out, that means the subsequent Stages predicted by Hays would be a necessity for supply and demand to match up.

And Hays isn’t the only one predicting additional Stages.

Piecyk has long said that as many as four Stages may be necessary to bring the auction to a close. Piecyk has pegged the end date for Stage 4 sometime at the end of February 2017.

Michael Calabrese, director of the Wireless Future Project at New America’s Open Technology Institute, on Twitter also forecast the need for another Stage to drop the price target further.

Now that the clearing target has been set, the FCC will gear up for the launch of the Stage 2 forward auction next week.

The Commission previously told participants the forward auction would start four days after the close of the reverse auction.