Forward Auction Numbers Don't Tell Broadcasters Much
It's too early for broadcasters to reach conclusions about how the forward portion of the incentive auction is proceeding, numerous broadcast attorneys and analysts said in interviews Friday, as the auction went through stages 19, 20 and 21. At the close of stage 21 Friday evening, the forward auction had generated $20.57 billion in proceeds, more than $60 billion short of what would be needed to make this the final stage. Because the FCC controls the increments prices rise between rounds, and wireless providers are concentrating on the largest markets, the early results are almost automatic and don't offer much useful information (see 1608230063), said broadcast attorney Jack Goodman. “It's just a clock ticking.”
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Goodman and others said more information about the plans of wireless bidders could be gleaned from later rounds, and especially from the likely gap between the total proceeds and the $86 billion cost of closing the auction in this stage (see 1606290081). “There's not enough information right now” said BIA Kelsey Chief Economist Mark Fratrik.
The FCC Public Reporting System offers information about what spectrum is being sold where, and it currently shows bidder interest in spectrum in the largest markets, said SNL Kagan consultant Justin Nielson. But it's expected that in the early rounds, bidders will concentrate on the larger markets to avoid tipping their hands about the spectrum they're truly interested in, numerous analysts told us. That makes it difficult to deduce anything from these early rounds, Nielson said. The FCC didn't comment.
LPTV Spectrum Rights Coalition President Mike Gravino doesn't agree it's too early. He sees the auction's steady progression and rising proceeds as indicating analysts have been too bearish on wireless entities' interest in the auction. Gravino stopped short of predicting the auction would finish in a single stage, but he believes the gap won't be as large as predicted. A higher cost for broadcast spectrum in the incentive auction is good for low-power TV because it raises the value of the spectrum that LPTV stations will be repacked onto after the auction. Investors seeing the high prices of the incentive auction will see an upside in LPTV spectrum, Gravino said.
Broadcasters likely won't be able to start drawing concrete conclusions about bidding interest in their spectrum until the auction reaches the final stage, Wilkinson Barker communications attorney Jonathan Cohen told us. “The process is playing out as the FCC designed it.” The gap between the proceeds at the final stage and the cost of the auction will give auction watchers a sense of how long the auction will continue. The FCC has said it won't skip a clearing target to shorten that span (see 1607200072), though analysts have told us that they expect more pressure on the agency to do so the wider the gap between closing costs and proceeds. Though subsequent stages of the auction are expected to go more quickly, some auction watchers we spoke to expect the process to last well into 2017.