The securities research unit says the FCC incentive auction of broadcast spectrum is likely heading into more stages after the opening day forward auction in Stage 1 yielded just $8.5 billion in bids. The FCC needs $88.5 billion to cover the offers it made to broadcasters for the spectrum on the block and to cover associated administrative costs. "We still stick with our original analysis, which says that the forward auction will ultimately net anywhere between $27 billion and 38 billion," it says.
Wells Fargo Sees Spectrum Auction Shortfall
With only $8.5 billion in bids from wireless carriers in the opening round of the FCC’s forward auction of TV spectrum yesterday, the auction will likely fall far short of the $88.4 billion that the FCC needs to make good on the tentative offers it made to broadcasters to buy their spectrum in the reverse auction in June and to cover other associated costs, Wells Fargo Securities says in a memo to clients this morning.
“We don’t see how this incentive auction will come in at more than double the AWS-3 auction,” the memo says. The AWS-3 auction of non-broadcast spectrum early this year yielded $45 billion.
“We still stick with our original analysis, which says that the forward auction will ultimately net anywhere between $27 billion and 38 billion,” the memo says, adding that that will happen in Stage 4 with a clearing target of 84 Mhz.
A “stage,” in FCC parlance, means both sides of the two-sided incentive auction — the reverse auction in which the FCC tentatively buys channels from willing station owners and a forward auction in which the agency will sell the channels to wireless carriers.
The FCC will keep conducting stages until the what it agrees to pay broadcasters for a certain amount of spectrum matches up with what wireless carriers are willing to pay for it. In each stage, the spectrum the FCC seeks would go down.
Comments (7)
Ellen Samrock says:
August 17, 2016 at 12:33 pm
“This is a once in a lifetime opportunity” is the broadcaster equivalent of “If you like your plan, you can keep your plan.” A broken promise, an expedient lie issued from the Obama regime to further the president’s agenda. A lot of station owners, particularly among the Class A’s, were banking on the fantastical numbers of the Greenhill Report or close to them. Reality is now setting in. But Wells Fargo wasn’t the only one who was skeptical of the FCC’s unicorn thinking. Many of us were and dismissed the incentive auction with the same cynicism and contempt under which it had been conceived.
Darrell Bengson says:
August 18, 2016 at 9:14 am
Why have people turn this all political “The Obama Regime”…like it would be happening any different if anyone else would have been in the WH. People like you are whats wrong with this country today, you can’t see past your hate,conspiracy and paranoia.
Andrea Hogben says:
August 17, 2016 at 6:54 pm
Just my running the numbers – but the reverse auction prices should drop like a rock. 100Mhz cleared was overly ambitious – and they didn’t reach that – they couldn’t even clear Greenville/Asheville? They had to stretch and go to C2 spectrum to make it go. Meaning WAY too many people had to freeze at open… But future rounds will drop like a rock.
If 10 stations were needed to clear 100 Mhz, and they barely got to 100 Mhz by getting 10 stations to participate, they ended up paying 10 * 100% = 1,000 % for the market. Now if we go to stage 2, and they only need 8 stations in that market, the 2 richest stations drop out above 50%, and potentially they only need 8 * 50% = 400% to clear the market. Thus the cost to clear drops 60% while the available spectrum drops 10%.
If the auction goes to Stage 3, they only need 7 stations, the next richest drops out at lets say 33%, now its 7 * 33% = 231%. Now the cost to clear is down 77% while available spectrum drops only 20%.
So if Forward brings in only $30B (25% quartile of Wells Fargo estimate), cost to clear needs only to drop 68% to match. CRA’s models seem to agree ?
Ellen Samrock says:
August 17, 2016 at 7:27 pm
On day two, after the discounts, the figure has edged up to 9.2 billion. I think this auction needs a telethon or a pledge drive or a blood transfusion–something to pick up the excitement. I mean, is this any way to treat beachfront spectrum? Come on, people! Open your wallets!
Bobbi Proctor says:
August 18, 2016 at 1:06 am
Why are broadcasters even able to sell spectrum that doesn’t belong to them anyway? They have broadcast licenses to use a frequency. If they don’t want to be broadcasters they should have turned in their licenses to be available for someone who wants to be a broadcaster. The whole thing is a bad idea and we viewers are going to lose service.
Darrell Bengson says:
August 18, 2016 at 9:17 am
Wake up, reality is calling….
Veronica Serrano Padilla says:
August 18, 2016 at 11:23 am
Why? Broadcasters have a really good lobby …