Wells Fargo analysts Marci Ryvicker and Jennifer Fritzsche address questions as the FCC's "forward" portion of its incentive auction approaches.
Seeking Clarity On The Incentive Auction
During Wells Fargo’s annual D.C. Regulatory Day Wednesday, which analyst Marci Ryvicker co-hosted with telecom analyst Jennifer Fritzsche, one of the big topics was the incentive auction. Here are some of the investors’ questions.
How was the clearing target so high ($86 billion)?
From our understanding, it was a combination of the types of stations that dropped out and the general robust participation. We stress that the broadcasters did not “bid up the price”; they just said yes or no in response to the FCC’s auction algorithm.
When will the forward auction start?
Should the Qualified Bidders Public Notice come out on July 15, the auction will start no less than 15 business days later (taking us to Aug. 8). Between now and then, there will be a bidder education process (i.e., a technical user guide and online tutorial), and a mock auction.
How long will the forward auction last?
BRAND CONNECTIONS
There is no estimated time — it all depends on demand. Recall the AWS-3 auction ran 15 rounds a day at the end — whether or not it happens this time around is unclear.
If there is a second stage, when might this start?
Technically, no earlier than five business days after the first stage; but given there needs to be a second education process our guess is at least two weeks after the first stage.
How long will subsequent stages last?
The next reverse would likely be another 52 rounds — so a month or less. We still don’t know how fast the forward auction will be, but since it resumes where the last left off, each subsequent stage will be shorter and shorter.
How is the next clearing target decided?
There is a predetermined band plan; and it is our understanding that the FCC will not be skipping clearing targets (so the next will be 114 MHz followed by 108 MHz).
What information will we get during the forward auction?
We will get aggregate price and demand per product (i.e., Category I and II licenses) in each PEA (partial economic area) after each round; and we’ll also know how close we are to clearing the final stage rule.
How does the second stage of the reverse auction begin?
It essentially starts from where the prior reverse auction ended, but is based on the highest winning price — introducing the “frozen pending catch up” concept.
How does the second stage of the forward auction begin?
The FCC will rerun the clearing target to determine “new impairments.” Then they will start the forward bidding process at prices from where the prior forward stage left off.
What is the assignment phase of the forward auction?
During most of the auction, forward bidders are bidding on generic blocks. In the assignment phase, each winner has the chance to bid for a specific block in 1 sealed bidding round.
What happens if the auction goes into 2017?
The FCC doesn’t have any expectations one way or the other; given this is a bipartisan issue, the auction will run until it ends.
What happens if a specific market clears?
This is a nationwide auction — it does not end until the clearing target is met.
Comments (5)
Amneris Vargas says:
July 13, 2016 at 8:10 pm
Thank you for this clarity
Ellen Samrock says:
July 13, 2016 at 9:52 pm
The clarity is, that there ain’t no way anyone is going to be collecting 88 billion dollars in this auction, certainly NOT the Feds. AT&T and T-Mobile have committed to bid only 10 billion and Verizon 5 billion, according to the Motley Fool. In fact, the T-Mobile CFO has said that they can get all they need for a billion. The FCC better start cranking up the pressure on Dish and Comcast as well as the local carriers. The other question, the one not asked is; what kind of cooperation are the Feds getting from our neighbors in the north and south? So far it’s been crickets from the Canadians and Mexicans.
Kristen Lynch says:
July 14, 2016 at 2:40 pm
This is not quire true. The FCC has reached agreements with both Canada and Mexico. Under the Canadian agreement, Canada agreed to both use the US band plan and to let the FCC determine a repacking plan, although it must protect all licensed Canadian facilities. Mexico was less generous but still will allow reallocation of a substantial swath of spectrum. What neither has agreed to (at least publicly) is an expedited relocation scheme, and at least in Canada, the government has not proposed compensation for repacking broadcasters.
Ellen Samrock says:
July 14, 2016 at 7:55 pm
Yes, the agreements are in place and have been for some time. Mexico committed to 84 MHz, I recall. But as the TV Technology article by James O’Neal said there is no incentive for these countries to move stations or to do so when the FCC wants them to. Or as Dennis Wharton indicated, ‘there is no mechanism in place for funding the moves and no timeline.’ That is what I was referring to, not the agreements themselves.
Keith ONeal says:
July 15, 2016 at 12:27 am
@Jack Goodman ~ So it seems that Canada and Mexico will follow suit on the repack. Totally expected. When the FCC dumped UHF Channels 70-83, Canada and Mexico followed suit. When the FCC dumped UHF Channels 52-69, Canada and Mexico followed suit. Typical.