News
Broadcaster lobby group calls on telcos to step up and prove there is demand for TV airwaves.
The U.S. this week completed the reverse auction stage of its two-part incentive auction, placing a hefty US$86.4 billion (€77.8 billion) price tag on clearing TV airwaves so they can be reused for mobile services.
In total, the Federal Communications Commission (FCC) cleared 126 MHz of 600-MHz spectrum. According to the auction rules, operators’ cumulative bids in the forthcoming forward auction must hit that $86.4 billion figure in order for the spectrum to be sold.
If that target is not met – and at $86.4 billion, or approximately $2.15 per MHz per capita, that seems a highly likely outcome – then the FCC will have to conduct further rounds of the reverse auction in order to lower the price, which will have the effect of reducing the volume of spectrum available in the forward auction.
"Broadcasters have done our part; now it’s up to the wireless industry to demonstrate the demand is there for low-band TV spectrum," said Dennis Wharton, EVP of the National Association of Broadcasters (NAB) on Wednesday.
The last major U.S. spectrum auction concluded in January 2015, and saw bidding for 65 MHz of spectrum in the 1700 MHz and 2.1 GHz bands reach almost $45 billion.
The last time sub-1-GHz spectrum went under the hammer was in 2008, when the FCC auctioned 84 MHz of 700-MHz spectrum, raising $18.6 billion.
One could argue that the price of spectrum is bound to increase, what with the ongoing growth in data demand and the fact that 126 MHz is a very large amount of spectrum; however, $86.4 billion will be a stretch for even the wealthiest U.S. telcos.
"No one in their right mind can think the carriers and whatever others are going to come up with $86 billion," said Roger Entner, founder of Recon Analytics, in a Bloomberg report.
In April 2015, the U.S. Congressional Budget Office estimated that the incentive auction would raise $10 billion-$40 billion; however, it confessed that it was hard to predict an outcome because the FCC had never carried out an incentive auction before.
Wells Fargo analysts polled by Bloomberg in January predicted that bids would total $33 billion, with AT&T, Verizon and T-Mobile accounting for approximately $23 billion.
Those three nationwide operators are among the 104 companies that applied to participate, but the fourth, cash-strapped Sprint, ruled itself out early on. So did Google, while cablecos Charter and Cablevision – the latter of which was recently bought by acquisitive cable group Altice – are not expected to bid either.
However, some other big names are likely to be involved.
Cable giant Comcast is expected to take part, as is satellite provider Dish. Buying up more spectrum and launching mobile services is seen as a logical way for TV providers to defend themselves against the likes of AT&T and Verizon, which have been muscling in on the TV market lately.
Telcos themselves have kept quiet, while their lobby group the CTIA, played it cool.
"We are pleased to see the 600 MHz incentive auction move closer to delivering spectrum for wireless providers so they can meet Americans’ mobile-first lifestyles," said CTIA chief Meredith Attwell Baker, in a statement. "With mobile data usage expected to rise six-fold by 2020, we will need to use all tools, including an effective incentive auction process and high band spectrum, to meet consumer demand and continue our wireless leadership."
Will telcos ‘do their part’ as NAB’s Wharton demands, or will they try to avoid ruining their balance sheets by spending less than $86.4 billion?
I’m pretty confident that even I can guess the answer to that one.
