Experts Worry FCC Faces Challenges Completing 2.5 GHz Auction on Tight Schedule

The FCC’s decision to start the 2.5 GHz auction July 29 doesn’t allow much wiggle room to complete the sale by Sept. 30 when the FCC’s auction authority expires, industry experts said. The FCC will do an ascending clock auction, as expected (see 2203100051), starting that date, said a notice in Tuesday’s Daily Digest. The agency also said it’s launching a mapping tool that can be used to help determine whether and to what extent unassigned 2.5 GHz spectrum is available in any U.S. county. The FCC will sell some 8,000 new flexible-use geographic overlay licenses in the band.

The start date is “certainly a concern,” Recon Analytics’ Roger Entner told us. “It gives them around two months to conduct the auction,” he said: “C band was roughly two months, the 3.45 GHz auction was more than that. If there is vigorous and extended bidding it is quite possible that this auction could go longer than what the current spectrum authority time frame allows.”

“With such a large number of licenses that are not fungible, there is definitely a risk that this auction could extend beyond Sept. 30,” Sasha Javid, BitPath chief operating officer, told us. “The FCC has the authority to increase bidding increments as large as 30% to speed things up, but this requires that small bidders don’t complain about such a move and instead leverage the intra-round bidding feature,” he said. He noted Congress seems likely to extend the FCC’s auction authority to head off potential problems.

The FCC isn’t to blame if timing is tight, said New Street’s Blair Levin. “Perhaps it is Congress that is cutting it a little close by not acting with a simple [auction authority] extension,” he said: “Wherever one wants to put the burden, there is some mild risk of a snafu, but given the success of the auction program over the last 25 years … the odds favor a resolution that allows the FCC to proceed with the auction and the issuing of the licenses.”

Having a launch date for the auction is “is nothing but a positive sign,” said Cooley’s Robert McDowell. “It shows strong leadership,” he said. Based on recent conversations with key congressional staff, McDowell senses “some sunny optimism that there is likely to be some type of legislation allowing the FCC to continue to work on the auction after Sept. 30, should it continue beyond that date."

“The main impact of a multi-round format is to allow T-Mobile to acquire whatever 2.5 GHz spectrum they want and at a lower price,” emailed Michael Calabrese, director of the Wireless Future Program at New America: “While this format will put smaller and rural broadband providers at a distinct disadvantage, the proxy bidding feature and spectrum mapping tool are innovations that should also reduce costs and increase participation by smaller ISPs. The biggest shortcoming, decided under the [Ajit] Pai FCC, is not having a cap on the total amount of 2.5 GHz spectrum that can be controlled by a single provider.”

Policy Calls

The main policy call in the notice was in favor of an ascending clock auction, rather than a simultaneous multi-round (SMR) or single-round auction. The notice notes the comments were divided on this issue. An SMR auction for 8,000 licenses could “take a very long time to complete,” the notice said.

“Commenters that prefer a multiple round auction format … indicate that they prefer such a format because the bidding strategies they are accustomed to using depend upon the pricing and demand information that is revealed in a multiple-round auction,” the FCC said: “Some commenters feel that it would be easier to manage aggregations and budget risk over multiple rounds of bidding, in spite of the package bidding and either/or features that would have been incorporated into the single-round auction format to address those needs. While we are not persuaded that price discovery is always a necessary ingredient for an economically rational auction, we recognize that bidders are accustomed to managing their bidding strategies and budget constraints through round-by-round bidding and find that this familiarity may encourage more participation in the auction.”

Some commenters “support the single-round format because they assert that they do not have the resources to manage a long auction,” the notice said: “The clock auction format we adopt, however, addresses this concern in part by incorporating intra-round bidding, which allows the auction to run with larger bidding increments without the risk of overshooting the equilibrium price. With larger bidding increments, the auction may be completed in fewer rounds, thus shortening the duration of the auction.”

The FCC said it recognizes concerns by the Wireless ISP Association and others that small players will be scared away from a more complicated multi-round auction. “While some smaller entities may be less likely to participate in a multiple-round auction, other smaller entities assert that a multiple-round auction would in fact be more likely to encourage participation,” the agency said. "Although we advocated that the single-round, sealed-bid model would bring more providers to the table, we remain hopeful that several of our members will participate as a result of the county-size license areas," a WISPA spokesperson emailed.

Among other details, short-form applications are due May 10 and upfront payments June 23. The FCC plans a mock auction July 26-27.

“The 2.5 GHz band auction can help deliver on the promise of 5G services and ensure that it reaches as many people as possible,” Chairwoman Jessica Rosenworcel said in a statement: “The 2.5 GHz band spectrum provides an opportunity to fill in some of the critical 5G gaps in rural America.” Rosenworcel has said the FCC should be able to complete the sale before its auction authority expires (see 2202180054).

Commissioner Brendan Carr said the auction could have started last year. An SMR format “made a lot of sense, given that we are not dealing with generic or fungible licenses in this auction,” he said: “Nonetheless, I think it is important that we get going with this auction, so I am voting to approve of the decision to use an ascending clock format.”