Confounding clearing cost of $86,433,558,704 reached in spectrum auction

An unexpectedly high clearing cost of $86,422,558,704 was reached in the first reverse stage of the TV spectrum incentive auction that has concluded, according to the Federal Communications Commission’s Incentive Auction Dashboard.

Analysts were expecting between $35 billion to $60 billion.

The next stage is the forward auction that will be for the wireless industry bidders to cover that amount, plus $1.75 billion to cover the broadcaster relocation fund as well as the administrative costs of holding the auction. It is expected to start at the end of this month.

Those bidders will participate in the forward auction, which likely will start toward the end of July.

If buyers offer less than $86 billion, the FCC will cut the amount of spectrum it acquires. Many stations would then have to decide whether to lower their prices, or continue transmitting over-the-air signals.

“Today, bidding concluded in the reverse auction, establishing the cost for clearing 126 MHz in the TV band for wireless use,” said Gary Epstein, chair of the FCC’s Incentive Auction Task Force, in a statement. “Strong participation from broadcast stations made this initial clearing target possible. Now the action shifts to the forward auction, which will give wireless bidders the opportunity to compete for this beachfront spectrum to meet America’s growing mobile data needs.”

Although the auction may still end as early as August, the surprisingly high clearing cost may push the process back months, possibly into 2017, slowing down carriers putting to use the low-band spectrum and the resulting industry work to do so.

CTIA CEO Meredith Attwell Baker said, “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. 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.”

The National Association of Broadcasters Executive Vice President of Communications Dennis Wharton released the following statement regarding the conclusion of the first reverse 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.”

Other FCC Releases and Actions (June 29, 2016)