The FCC reverse auction closes out round two
October 13, 2016
Round two of the Federal Communications Commission reverse auction ended Thursday morning with much more favorable numbers than round one.
While it will still be a challenge for the forward auction to cover the costs, it’s more within the realm of possibility than last time.
The broadcast clearing cost fell to $54.6 billion in this round of the reverse auction, down from $86.4 billion for round one. That was considered way too high.
Background on the auction
As a quick reminder, here’s what the spectrum auction is about. The FCC is offering to buy out stations’ airwaves so it can then sell them to wireless providers.
In the reverse phase of the auction, stations offer up their broadcast spectrum, and the FCC chooses those stations with the lowest offering price. Stations that win the auction then go off the air entirely or choose to broadcast at a different frequency.
The FCC will then take that spectrum and sell it off to wireless companies who are hoping to upgrade their digital infrastructure. That’s the forward auction.
The forward auction has to raise enough to pay for the reverse auction. If that doesn’t happen, then the reverse auction begins again, with lower payouts being offered.
Analysts’ take on the reverse auction
Analysts said Thursday that the auction is moving in the right direction.
“This is WELL BELOW what we (and the DC pundits) had been expecting ($60-70B) and should be considered a POSITIVE surprise,” wrote Wells Fargo Securities analyst Marci Ryvicker in a note to clients.
“With the bid-ask spread narrowing (recall Stage 1 of the forward auction ended at $23.1B in total proceeds), we think this auction could end earlier than expected (i.e. before year-end).”
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