Spectrum sales advocate Preston Padden predicts wireless carriers will bid up to $80 billion for TV broadcasters’ spectrum in the FCC’s incentive auction. While not dismissing Padden's estimate, wireless attorney Michelle Farquhar thinks bids will end up around $45 billion, driven by consumer demand for mobile video. “Mobile video is getting huge and it’s going to take off,” she said.
Padden Sees An $80B Spectrum Gold Rush
Analysts suggesting that demand for the TV spectrum in the FCC’s upcoming incentive action will be low have it all wrong, says Preston Padden, the former network lobbyists who represents station owners hoping to sell their spectrum.
In fact, he said at an NAB Show panel session Monday, the bidding of wireless carriers will far exceed the $44 billion they spent in the AWS 3 auction last year, topping off at $80 billion. “And of that $80 billion, a very substantial amount will go home with a lot of deserving broadcasters.”
While not dismissing Padden’s estimate of $80 billion, Michelle Farquhar, an attorney representing wireless carriers that have told the FCC they might bid for spectrum, said that she fells more comfortable with estimates of between $35 billion and $45 billion.
“That’s certainly seems realistic based on what we know today.”
Driving the carriers’ demand for spectrum is consumers’ demand for mobile video, she said. “Mobile video is getting huge and it’s going to take off.”
The FCC incentive auction is actually two auctions. In the first reverse auction, the FCC will buy spectrum from broadcasters. Then, the FCC will turn around and sell what it buys to wireless carriers in a conventional forward auction.
Padden said his bullish forecast is based on intense interest in the auction among both buyers and sellers.
Broadcasters of “every size and type” — including CBS, NBC, Fox, Sinclair, Tribune, Ion and Univision — have said that they might sell some or all of the spectrum of their TV stations, he said.
And 104 companies have told the FCC they might join in the bidding to buy spectrum, he said.
“The carriers’ incentives to bid are strong, if not stronger, in this auction than they were in the AWS 3 auction. Spectrum is still the lifeblood of the wireless carrier business. They can’t do without it,” he said. “This [TV] spectrum is uniquely valuable because of its ability to go long distances and penetrate walls.”
Reports that the big carriers don’t have the financial wherewithal to bid are “ridiculous,” he said. “We are talking about some of the most credit-worthy organizations on the planet with debt-to-equity ratios that are miniscule at a time when money is essentially free.”
The four biggest bidders AWS 3 — AT&T, Verizon, Dish Network and T-Mobile — will be back, he said. In addition, there will be several deep-pocketed “disruptive” bidders.
They include billionaire tech investor Raj Singh who has joined with Columbia Capital; Comcast; billionaire media investor Mario Gabelli; and billionaire Chamath Palihapitiya, who has built a wireless network in Sri Lanka.
“So you look at these potential disrupters in addition to the four primary bidders in AWS 3, you look at the fact there is going to be more spectrum, [and] I don’t know how anyone could conclude that the revenues will be lower in this auction than they were in AWS 3.”
The next big step in the auction process will be the FCC’s announcement of the clearing target — how much TV spectrum it will attempt to buy based on what it knows about the bidders.
The announcement is expected later this month or early next, Padden said, but it could come earlier.
Noting that FCC Chairman Tom Wheeler is scheduled to appear at NAB on Wednesday morning, Padden said that if he were Wheeler and “had a flair for the dramatic,” he would announce the clearing target at that time.
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