Will the upcoming 2.5 GHz auction raise big bucks?

The upcoming Auction 108 of 2.5 GHz spectrum is likely not going to raise a ton of money. But at least it will clean up the spectrum band, closing the many gaps where the spectrum is lying fallow and not being used at all. The auction will begin on July 29.

When the auction date was announced, FCC Commissioner Brendan Carr said, “While some might argue that today’s 2.5 GHz Public Notice — which largely adopts procedures the agency previously proposed — isn’t exactly a headline grabbing decision, for my part I am glad we are taking this last step to get the 2.5 GHz auction across the finish line.”

While some auctions, such as the C-band auction held last year, aim to make billions of dollars to fill federal coffers, not all auctions are strictly focused on profit.

Sasha Javid, COO with BitPath and a former chief data officer with the FCC, said the FCC has multiple mandates. Yes, it’s nice to hold auctions that raise a lot of money, but the FCC also wants America to win the race to 5G, especially against China. And it wants the nation’s spectrum assets to provide the most benefit for the public.

For the upcoming 2.5 GHz auction, the FCC has chosen to use ascending clock rules. AT&T had petitioned the FCC to use a single round, sealed bid process for this auction.** It argued that it would entice more bidders and raise more money. But the FCC chose ascending clock rules, which will likely favor T-Mobile.

Javid said, “The most important reason the FCC chooses ascending clock versus a single round bid is to give bidders the opportunity to have price discovery.” The multiple rounds of an ascending clock auction give bidders “multiple bites at the apple,” letting them decide how badly they want a particular license, he said.

In the case of the 2.5 GHz spectrum, T-Mobile wants to fill in the holes of its nationwide mid-band spectrum. So, the opportunity to use multiple rounds to precisely target holes will be advantageous to the carrier.

“It’s likely they [T-Mobile] would have overpaid for licenses in a single round, sealed bid,” said Javid. A single round bid would probably also have enticed more bidders to the auction.

Why wouldn’t the FCC want T-Mobile to pay the highest possible prices, and why wouldn’t it want the most bidders to participate? Javid again said it goes to the larger public policy goals of the FCC.

He’s skeptical whether AT&T and Verizon will even participate in this auction. It is likely that some smaller wireless internet access providers (WISPs) will bid in counties they particularly want.

Unlike the recent 3.45 GHz auction, which had to hit a reserve price in order for the auction to succeed, Auction 108 for the 2.5 GHz spectrum won’t have a reserve price. There will just be a minimum opening bid. “There isn’t a chance of the auction failing,” said Javid.

Michael Calabrese, director of the Wireless Future Program with the non-profit think tank New America, said the last couple of mid-band auctions had reserve thresholds because the FCC needed to raise a certain amount of money to pay previous users of the spectrum to move. That isn’t the case with this auction, where the spectrum is not currently being used.

Given that there are about 8,000 licenses in Auction 108, the process could go on for several months — even into the fall, said Javid.

Smaller players

New America had advocated for a single round, sealed bid auction because it thought that would give smaller players a chance to win some spectrum. 

Calabrese said, I think the Democrats [on the FCC] were torn between realizing that they want T-Mobile to be in at least as strong a position as AT&T and Verizon, but on the other hand they want to encourage more bidders and competition.”

He said he thinks the decision on the 2.5 GHz auction is a result of the FCC currently being divided between two Democrats and two Republicans, which causes FCC Commissioner Jessica Rosenworcel to avoid contentious issues. “They essentially need Carr’s vote, and he always wants to maximize what’s good for the big mobile carriers,” said Calabrese.

In this case, the big mobile carrier that benefits the most is likely to be T-Mobile.

On the other hand, at least Auction 108 will be using county-sized bidding areas, which is something that the WISPs prefer. They can target smaller-sized spectrum areas and not have to pay for larger areas they don’t plan to use.

**Correction: The story originally said Verizon and AT&T wanted a single round bid. In fact, it was just AT&T and some smaller carriers that wanted a single round bid.