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FCC to Pay Less for Airwaves as Auction Moves to Third Round

02/12/2016 1:10am

Dow Jones News


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The amount the U.S. government could spend to buy up airwaves from local TV stations fell 26%, as a complex auction that is designed to free up spectrum for wireless services enters its third round.

The Federal Communications Commission said Thursday it agreed to spend $40.3 billion to acquire airwaves from broadcasters, below the $54.6 billion level of the second round and well below the $86.4 billion the FCC agreed to pay in the initial round in June.

In the first two rounds, the government failed to draw enough bids from wireless companies like AT&T Inc. and Verizon Communications Inc. to cover the cost of the licenses it agreed to buy.

The process that the FCC is using is complicated. First it buys the licenses from participating broadcasters in a reverse auction that lowers prices until it gets the needed airwaves at the lowest possible price. It then tries to sell airwaves for cellular use to wireless carriers. If total bids don't reach the amount paid to broadcasters, the process repeats.

The widespread use of smartphones, and the need for more bandwidth to power them, prompted the government to try to repurpose airwaves used by some television broadcasters, which could then use different frequencies or go off the air completely. The airwave frequencies in the auction are ideal for sending cellular signals great distances and penetrating deep into buildings.

The initial bidding for 100 megahertz of licenses, and 90 megahertz in the second round, wasn't expected to succeed because the price was so high. The government's previous sale of spectrum in 2015 produced almost $45 billion in bids. The latest round is down to 80 megahertz with bidding expected to resume Monday.

FCC officials have said the auction is designed to run multiple rounds to match supply with demand. Bids in all phases of the auction are anonymous until it is completed. If the wireless bids fall short again, the government may have to continue with more rounds stretching into next year.

After the first round of bidding, companies such as AT&T and Verizon only offered to pay $23.1 billion for the airwaves. The second attempt unexpectedly ended after just a single two-hour round of bidding in October because of lack of demand, triggering a quick restarting of the complex process.

If demand falls short of supply in the largest markets, then the stage will end. The second stage of bidding failed to cross that threshold despite drawing $21.5 billion in offers.

In addition to the wireless carriers AT&T, Verizon, and T-Mobile US Inc., Comcast Corp. and Dish Network Corp. are also participating in the auction. Some bidders may not win licenses.

Among those that have filed to sell stations are CBS Corp. and Univision Communications Inc., as well as local PBS stations and investors such as billionaire Michael Dell.

Write to Thomas Gryta at thomas.gryta@wsj.com

 

(END) Dow Jones Newswires

December 01, 2016 19:55 ET (00:55 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.

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