US FCC’s 24-GHz auction passes $1.5b in bids
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Round 29 of the US FCC’s 24-GHz auction closed Wednesday with $1,592,755,155 in gross proceeds, with the nation’s biggest cities garnering millions of dollars in bids. New York topped $41 million and Los Angeles tallied over $31 million.
It’s the little town of Van Horn, Texas, that’s setting the record so far for price per MHz-POP, at just over 10 cents as of the end of Wednesday.
But wait a minute. Van Horn, a town with a population of just over 2,000, is about 118 miles northwest of El Paso—seemingly in the middle of nowhere if you’re not from there. Its total price as a market so far is just $63,000. So, what gives?
What’s happening is bidders appear to be moving into some of these smaller markets in parts of western Texas and Iowa to “park” (i.e., maintain) their eligibility even while reducing exposure in top markets that are increasingly expensive, according to Sasha Javid, COO at The Spectrum Consortium. He told – that “maintaining eligibility is important as carriers seek to optimize their portfolio of licenses nationwide.” Javid is tracking each round of the auction on his website and sending daily updates via email.
The strategy is perfectly legal and just a part the auction process. “It’s just a cheap place to maintain a little bit more eligibility,” Javid told.
Much of the auction process is secretive—there are anti-collusion rules and bidders can’t talk to one another, for example. The FCC isn’t releasing the names of the winners of the 28-GHz or 24-GHz auctions until both are concluded. But as a data analyst, Javid can glean some insights into the trends he’s observing.
The 24-GHz auction kicked off on March 14 and unlike its predecessor, the 28-GHz auction, it includes many more markets, both big and small. Much of the 28-GHz spectrum was already controlled by Verizon before that auction even launched last year; it ended up raising just $700 million.
“It’s just a cheap place to maintain a little bit more eligibility,”
Auction 102 is following the “clock phase” format, which enables participants to bid on between six or seven 100 MHz generic blocks within the FCC’s designated Partial Economic Areas (PEAs) across the country, in a series of successive bids. The 28-GHz used a standard multiple round format.
However, Javid, a former chief data officer to the FCC’s Incentive Auction Task Force, said he still believes that using Auction 101 for a price per MHz-POP comparison is fair even as total proceeds in Auction 102 appear to be flattening over the past few rounds.
“This would have Auction 102 close at roughly $2.5 billion,” he said. “From a timing perspective, we are probably talking another 2 weeks and up to a month should bidding prove to be more robust than expected or if a few products remain contested. It is safe to say, however, that Auction 102 will have a far shorter ‘long-tail’ than Auction 101,” which was not a clock auction.
Under these assumptions and assuming a relatively straightforward assignment round, “we are likely looking at mid-May to June for an end to the quiet period,” he said.
All of this is prefaced by the fact that it’s very difficult to predict exactly how any auction turns out. It depends on a lot of things, like carrier budgets and the intensity of competition over the most coveted products. Even the auction design can affect the results. “It’s a guess,” he said. One fact that Javid said is clear is that “nationwide bidders want more than 2 contiguous 100 MHz blocks.”
All this is happening as the FCC gears up for yet another millimeter wave auction later this year. At its April 12 meeting, the commission will consider teeing up the upper 37-GHz, 39-GHz, and 47-GHz spectrum bands, making it the third major spectrum auction to take place in 2019.
Questions & Answers
Q.Why are bidders reportedly targeting smaller markets like Van Horn, Texas, in the auction?
Why are bidders reportedly targeting smaller markets like Van Horn, Texas, in the auction?
Bidders appear to be using these smaller markets to 'park' their eligibility and maintain it. This strategy allows them to reduce exposure in top markets, which are becoming increasingly expensive, while still participating in the auction process.
Q.What is the expected timeline for the conclusion of Auction 102 and the lifting of the quiet period?
What is the expected timeline for the conclusion of Auction 102 and the lifting of the quiet period?
Auction 102 is expected to close in approximately two weeks to a month, though this could extend if bidding is more robust. The quiet period could then end around mid-May to June, assuming a straightforward assignment round.
Q.What difference is there between the auction formats for the 24-GHz and 28-GHz spectrums?
What difference is there between the auction formats for the 24-GHz and 28-GHz spectrums?
The 24-GHz auction (Auction 102) uses a 'clock phase' format, allowing participants to bid on generic blocks in successive rounds. In contrast, the 28-GHz auction (Auction 101) used a standard multiple round format.
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