3.45 GHz spectrum auction keeps chugging with price above $21B

The FCC auction for mid-band spectrum in the 3.45-3.55 GHz range reached more than $21 billion ahead of the Halloween weekend, with additional rounds underway.

Gross proceeds stood at $21.295 billion with 80 rounds complete as of mid-day Monday. Auction 110 is the third largest spectrum auction in FCC history, behind the AWS-4 spectrum auction that ended in 2015 at nearly $45 billion and the $81.2 billion C-band auction earlier this year.

There are five rounds taking place today, with the number of rounds increasing to seven on Tuesday.

Despite the increased number of rounds, Sasha Javid, Bitpath COO and former chief data officer and legal advisor for the FCC Incentive Auction Task Force, said it looks like Auction 110 could continue for at least another week, unless the FCC ups the price increment for each round.

“While all FCC auctions have a long tail where bidding continues in smaller markets, this auction is poised to have the longest tail of any auction since the FCC moved to clock auctions,” Javid, who tracks auction results closely with interactive maps available here, told Fierce. “Perhaps this is a function of the fact that bidders parked so much of their eligibility in a few large markets until the reserve price was met which delayed the spreading of bids to smaller markets.”

After 78 rounds as of Friday there were 121 products with greater demand than supply, with just seven landing in the top 100 markets.  That dropped slightly to demand outpacing supply for 113 products after 80 rounds.   

See Javid’s chart below illustrating the long-tail:

(Credit: Sasha Javid, BitPath)

Importantly, Auction 110 already met the auction reserve price, or minimum threshold, of $14.77 billion.  One large bidder appeared to drop out earlier in the process and there was a steep decline in demand, which had prompted new concerns the auction itself might be in jeopardy – but luckily was not the case.

RELATED: 3.45 GHz auction hits make-or-break stage

Although the clock phase could continue on for several more days, Javid noted the additional amount of money pouring in is small and he doesn’t expect the mid-band spectrum auction to reach his original prediction of $22.5 billion.

“Overall, however, outside of a few markets where coordination clearly impacted proceeds (San Diego, Philadelphia, DC and Seattle), the FCC must be happy with where prices ended up in for this auction in the biggest markets,” Javid said.

Top markets including New York, Los Angeles, Chicago and San Francisco have each generated above $1-2 billion in proceeds so far.

RELATED: 3.45 GHz auction blasts past $7B

Because of incumbent federal users, certain licensees need to first coordinate closely with government before starting operations in locations known as Cooperative Planning Area (CPA) or Periodic Use Areas (PUAs).

According to Javid’s tracking, the defined CPAs and PUAs mean 29.8% of licenses and roughly 18% of MHz-POPs require coordination after the auction closes, dropping to roughly 16% one year later.

Gross proceeds for the large markets Javid cited were notably less than other top markets at the close of bidding Friday.  San Diego ($42.83 million), Philadelphia ($204.2 million), D.C. ($339.9 million), and Seattle ($241 million) and with lower prices per-MHz POP.

Estimates from New Street Research analysts pegged auction proceeds at landing in the $21-22 billion range as of October 27, with the firm expecting prices to continue slowing.

RELATED: U.S. midband spectrum 3.45 GHz auction just around the corner

The auction started October 5 and after the sixteenth day of bidding the analysts noted that demand barely dropped while prices rose slowly.

“The final outcome for price – while largely rangebound- will still depend on how long it takes for the remaining 4MHz of excess demand to fall to zero,” wrote New Street’s Phillip Burnett in an October 27 note to investors. If there were 45 more rounds of bidding with prices continuing to rise roughly 0.3% per round, the analyst said final auction proceeds could inch up to $24 billion. “We think it much more likely that prices continue slowing from here, with an outcome in the $21-22BN range far more plausible (up form our prior guess of $20-21BN).”

AT&T, Dish Network, T-Mobile and Verizon are all among the 33 qualified bidders for Auction 110. AT&T is expected by some to bid the most in order to catch up on its comparative mid-band spectrum shortfall for 5G. Under FCC rules no single bidder can win more than 40-megahertz of the 3.45 GHz spectrum that is up for grabs.