2.5 GHz Auction Hits $115.3M After 3 Rounds

The FCC’s 2.5 GHz auction started slower than other recent 5G auctions and had little upward movement Monday, after three rounds. The auction hit $115.3 million Monday, after opening Friday at $103.5 million (see 2207290045). “Demand at the start of this auction is very tepid, with excess demand as a percentage of aggregate demand starting at roughly 37%, which puts this auction at the low end of prior auction starts,” blogged Sasha Javid, BitPath chief operating officer, about the start of the auction. “Perhaps this slow start is not surprising,” he said. “This 2.5 GHz auction is far from a typical spectrum auction.” The FCC is selling overlay licenses, which means many winners will have to negotiate with educational broadband service incumbents “if they want to use their entire license,” Javid said: “By my estimate over 80% of the MHz-POPs in these overlay licenses are encumbered (including both incumbents and all pending tribal licenses). This could explain why both Los Angeles and Cook County (Chicago), the two most populated counties in the country have demand below supply at the county level.” Another factor, some 27.5% of the U.S. doesn’t have any licenses available for sale, he said. “This is because the FCC decided against selling overlay licenses in any county where every category of license was fully-encumbered when measured by area,” he said. T-Mobile holds long-term leases with most incumbents EBS licensees and “has an information asymmetry advantage over other auction participants. … Because these leases are confidential, other bidders will not know how long they may be precluded from accessing or re-leasing parts of their licenses currently encumbered by these T-Mobile leases.” New Street’s Jonathan Chaplin predicted in a weekend note to investors the auction will likely hit $3.4 billion, less if Congresses approves a 15% book alternative minimum tax on spectrum licenses (see 2204050083). He predicted the auction will likely end in September. “We have a long way to go,” Chaplin said: “The spectrum is useless to Verizon, AT&T and Dish [Network]; their only interest in the auction is pushing up the cost for T-Mobile. Smaller carriers and [wireless ISPs] may actually have a use for some of the licenses, but these companies won’t have the resources to outbid T-Mobile for any licenses that T-Mobile views as important." But Digital Progress Institute President Joel Thayer noted widespread interest in bidding. “It's a credit to the FCC's ability in shepherding this proceeding along and I'm glad to see that we are going to unleash 2.5 GHz,” Thayer emailed: “This auction is particularly going to be helpful for T-Mobile to be an even stronger alternative to the ‘big two,’ which is great for consumers.” Thayer sees Verizon and AT&T as potentially more interested in 12 GHz, a band being looked at for 5G. Two more rounds are on tap Tuesday.