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FCC Formula for Opening Bids in 600MHz Auction Grossly Undervalues the Spectrum

February 9, 2015 - Written By Alexander Maxham

Now that the AWS-3 Auction is over with, which brought in a ton of cash for the FCC. We’re now all looking forward to the 600MHz spectrum, which would give carriers the best building penetration as well as cover more areas (although, unlike the 2.gGHz Sprint has, it uses much less bandwidth). The formula that the FCC is using for the 600MHz auction has not taken in the AWS-3 auction which ended in late January. Which undervalues, severely, the price of this spectrum. And some analysts aren’t too happy.

According to Preston Padden, who is part of a group of broadcasters called Expanding Opportunities for Broadcasters Coalition has stated that the FCC isn’t valuing the broadcaster’s spectrum correctly, and that’s due to the agency having created this formula before the close of the AWS-3 auction and therefore does not take into account the prices paid in the auction. The AWS-3 Auction ended on January 29th, which had net winning bids of about $41.3 billion. Which is around double what analysts had expected before the auction started. Padden also argues that the AWS-3 Auction shows how much carriers are willing to pay for spectrum, and he’s completely right. You could say that spectrum is like crack for these carriers. They always need more. And that’s due to them adding more and more devices onto their network which means they need more bandwidth, thus needing more spectrum.

“Since the auction goes only down from the starting prices, stations in these markets have no chance of ever seeing the original Greenhill expected values,” stated Padden, according to Broadcasting & Cable. “That is why the starting price formula has to be changed as suggested by the coalition.”

Currently, the 600MHz auction is slated to go out in early 2016. So we should see plenty more news on this auction before the end of 2015. Especially with T-Mobile lobbying to make it easier for smaller carriers to get spectrum, seeing as the bigger ones like AT&T and Verizon have a whole lot more cash to throw at these auctions.