TV Incentive Auction: Triple the Complexity and Triple the Price?

Wireless Wonk

TV Incentive Auction: Triple the Complexity and Triple the Price?

By Barlow Keener, Attorney  |  March 04, 2015

The TV Incentive Auction took all the limelight until a surprise this winter when the little known FCC (News - Alert) spectrum Auction 97 AWS-3, for 65mHz, suddenly generated $44.8 billion in bids. The AWS-3 auction sets the stage for predicting strong demand for the TV Incentive Auction spectrum’s possibly delivering as much as $60 billion in bidding, three times the earlier estimated amount of $20 billion.

FCC Commission Ajit Pai noted in the recent TV Incentive Auction Bidding Procedure Public Notice that the AWS-3 auction was far more successful than had been projected: “We’ve already raised approximately $43 billion, more than twice as much as the most optimistic predictions.” Simple math, which Commissioner Pai did not lay out directly, is that based on the AWS-3 bidding results; the TV Incentive Auction could potentially bring in twice to three times the estimated $20 billion originally predicted. However, the contrast of the AWS-3 auction’s simplicity highlights the TV Incentive Auction’s incredible complexity with its forward and reverse auction and impaired and unimpaired spectrum, and, thus, potential risk of failure.

AWS-3 is the first major spectrum auction since the record-breaking 2008 $19 billion 700mHz auction. The FCC reserve for the AWS-3 auction was set at $10.587 billion. This means that the bidding has now generated four times the expected reserve value. Based on the 2008 700MmHz auction with bids equating to $1.25 per mHz-POP, the AWS-3 estimated maximum bid value was previously thought to have been around $16 billion, according to BTIG analyst Walter Piecyk. The AWS-3 auction bids have exceeded the $16 billion market value estimate by almost three times.  For the FCC, it was like finding oil in someone’s backyard in Arlington. As Commission Pai pointed out, the AWS-3 auction will contribute an additional $5 billion for the FirstNet nationwide public safety network, hundreds of millions for NextGen (News - Alert) 911 implementation, and more than $20 billion for deficit reduction.

The FCC’s Dec. 17, 2014, TV Incentive Auction Bidding Procedure Public Notice outlined the detailed proposed procedures for the reverse auction TV station spectrum and the mobile carrier’s forward auction. While the relatively simple, but high demand, AWS-3 bidding was taking place, the FCC issued its incredibly complex bidding procedures for the TV Incentive Auction. Congress dictated the auction would be complex because the legislation required a reverse auction using a “descending clock format.” This reverse auction will free up 600mHz of Clearing Target (News - Alert) spectrum that will then be sold to mobile carriers two days later in a forward ascending clock auction.  

If the TV station is moved by the FCC into the 600mHz band because there is no room in the lower UHF channels, then the TV station could be deemed to be “impairing” the mobile carrier’s new spectrum. In essence, the mobile carrier and the TV station will be coexisting, or sharing spectrum, and working in ways to prevent the mobile carrier from interfering with the TV spectrum. The TV Incentive Auction will reclassify the 600mHz spectrum from 6mHz TV channels to 5mHz mobile blocks auctioning off up to 120mHz of spectrum, 60mHz for downlink spectrum. There will be an 11mHz duplex guard band for unsilenced use and, in some areas, 12mHz reserved for radio astronomy and unlicensed use in channel 37 and two 3mHz guard bands. 

The FCC proposal includes the concept of “dynamic reserve price” for the TV spectrum reverse auction. This method would lower the bid price even below a bid accepted by the TV station even if it is necessary that the TV station remain in the 600mHz band because there is no room further down in the UHF channels. The method will not result in the TV station voluntarily accepting an offer to go off the air. The method will potentially impair the spectrum within the local 600mHz PEA without necessity.

Commission Pai noted the auction’s complexity: “Today’s Public Notice contains proposals that unnecessarily layer even more complexity on top of the already complicated rules we adopted in May.  I wish stakeholders that plan to comment on them the best of luck; they will need it as they try to decipher what these proposals mean and how they are supposed to work.” 

The 2016 TV Incentive Auction could make the FCC into heroes with public safety, the Treasury, and TV stations looking for a way out of the diminishing valuations of over the air broadcast television.  However, the daunting task of simplifying complex auction remains to be solved to lessen the risk to all parties and increase the final bid results.




Edited by Maurice Nagle

INTERNET TELEPHONY Newsletter

Sign up for our free weekly Internet Telephony Newsletter!

Get the latest expert news, reviews & resources. Tailored specifically for VoIP and IP Communications.