T-Mobile, Dish Go Big in Incentive Auction
T-Mobile and Dish Network emerged as the big story of the forward part of the TV incentive auction, based on their high bids in the TV incentive auction (see 1704130049), analysts and other industry observers said Thursday after the FCC released results (see 1704130040). The other big news on the forward auction concerned which parties didn’t play -- AT&T bid $910 million for 23 licenses and Verizon sat the auction out. Comcast bid less than expected, $1.7 billion for 73 licenses through CC Wireless. T-Mobile won 1,525 licenses for $8 billion. Dish got 486 licenses for $6.2 billion through ParkerB.com Wireless, more than expected. Comcast came away with 73 blocks and $1.7 billion in licenses through CC Wireless. Those forward auction bidders bought the spectrum of 175 TV stations, leaving close to 1000 to be repacked by 2020, the FCC said.
T-Mobile’s buys were across 414 markets and almost exactly what was expected, wrote Jennifer Fritzsche, analyst at Wells Fargo, to investors. AT&T “as expected bid no more than its deposit and likely will get money back from the FCC in the form of a refund,” she said. “What is most interesting to us was VZ [Verizon] was nowhere to be found. While it does have a tremendous amount of 700 MHz spectrum (upper C block), we continue to believe VZ's interests lay in the higher band spectrum assets.”
“T-Mobile is the big winner in this auction,” said Roger Entner, analyst at Recon Analytics. “The auction process was engineered to favor them. I think it was a strategic mistake of Verizon not to have bid, as new low-band spectrum doesn't grow on trees.” New Street Research said “the most important result is the fact that we now have 10 business days until the auction quiet period ends and M&A discussions can begin.”
Gary Epstein, chairman of the Incentive Auction Task Force, said the auction worked exactly as planned. The auction was supposed to “find the equilibrium between the spectrum offered and the spectrum purchased,” he said in a call with reporters. The commission never predicted how much money would be raised in the auction or how much spectrum would be sold, he said. “The equilibrium was found. The auction mechanism worked. It worked at $20 billion and 84 MHz worth of spectrum.” Epstein added, “We’re neither thrilled nor disappointed nor anywhere in between.” The agency also issued a key public notice.
“The auction’s most positive outcome is that among the three largest buyers are potential new mobile market entrants, Comcast and Dish, and a scrappy competitive carrier, T-Mobile,” said Michael Calabrese, director of the Wireless Future Program at New America. “Since a national footprint of low-band spectrum with building penetration is essential to be competitive, consumers will ultimately gain far greater benefits from improved competition than the relatively small sum going into the Treasury.” With the channel reassignments known, the FCC should be able to move forward quickly on its vacant channel order, Calabrese said. “Relieving the uncertainty about a sufficient amount of unlicensed spectrum in every market is essential to kick-starting greater investment in using TV white spaces for rural broadband, IoT applications and for extending the range of Wi-Fi in mobile devices.”
The 175 TV stations selling spectrum was smaller than expected, some analysts said. “Even with the 84 MHz clearing target, I would have expected more,” said BIA/Kelsey Chief Economist Mark Fratrik. Thirty of those stations were moving to lower channels, but just 12 told the FCC they plan to go off air after the auction, said IATF's Epstein on the call. The other 133 indicated they plan to channel share. Attorneys, analysts and FCC officials said many of those may not yet have channel sharing agreements in place, and some of those stations may end up going off the air. The number of stations that are remaining in broadcasting instead of going off the air because of the auction is a “positive,” Epstein said.
The largest payout was the $304.3 million winning bid for WWTO-TV La Salle, Illinois, near Chicago, owned by religious broadcaster Trinity Christian Center of Santa Ana. Most analysts expected the largest bid to go to a station in New York or Los Angeles, said Justin Nielson of S&P Global Market Intelligence. Fewer stations in New York were winning bidders than expected, Fratrik said. One notable station in that market that did sell its spectrum was NBC’s “flagship station” WNBC New York, with a winning bid of $214 million. Notable Boston NCE WGBH-TV moved to a low VHF channel for a bid of $161.7 million. Though the data is still being examined, the numbers appear to indicate that companies seen as spectrum speculators such as OTA did relatively well in the auction, though likely not as well as they initially hoped, Nielson said.
Incentive Auction Task Force officials touted the degree of non-commercial station participation in the auction, which some analysts also told us was a surprise. Eleven non-commercial stations received more than $100 million each in the auction, out of 36 total winning stations receiving more than $100 million, the IATF said. New Jersey Public Broadcasting Authority’s WNJN Montclair received $193.9 million, the largest NCE payout, Epstein said.
“The broadcasters showed up and the carriers did not,” emailed Preston Padden, who advised broadcasters on the auction.
T-Mobile CEO John Legere hyped the company's big investment in spectrum in a video he released on Twitter, saying it gives the carrier 31 MHz of low-band spectrum nationwide. “This is a once-in-a-lifetime spectrum auction and @TMobile just cleaned up!” Legere tweeted.
“The conclusion of the 600 MHz incentive auction marks an important day,” said Competitive Carriers Association President Steve Berry in a news release. “Valuable 600 MHz spectrum will allow competitive carriers to satisfy consumers’ increasing demands for ubiquitous mobile service, and will benefit competition throughout the marketplace. Also important, over $7 billion will be allocated to the U.S. Treasury to reduce the federal deficit.”
“Increasing the amount of spectrum available to wireless providers benefits consumers and will lead to greater economic development in communities around the nation,” emailed Jonathan Adelstein, president of the Wireless Infrastructure Association.
The Information Technology and Innovation Foundation said the FCC should make sure the transition unfolds as quickly as possible. “The benefits to broadband users and the economy flow not just from spectrum being transferred, but its actual use -- equipment must be built out and turned on. Before this can happen, affected broadcasting services must be re-organized to fit within remaining spectrum,” ITIF said in a news release. “This ‘repacking’ -- overseen by the FCC -- will be a complicated, coordinated process achieved over several phases to minimize disruption to broadcasters, but the sooner it moves forward the better. The faster the repacking process takes place, clearing this fresh spectrum to be put into service, the sooner we see the true benefits of this historic auction.”
Release of a PN means the 39-month repacking clock began Thursday, and the FCC will need to repack 987 stations by July 13, 2020, said the document: “By this deadline, absent the grant of specific relief, all stations assigned to new channels must complete construction of their post-auction channel facilities, notify viewers of their impending channel move, commence operation on their post-auction channel, and cease operation on their pre-auction channels.” Since the transition is divided into phases, most broadcasters have a much earlier deadline. In Phase One, broadcasters who must relocate soonest have until Nov. 30, 2018, the PN said. Stations have 90 days -- until July 12, 2017 -- to file their construction permits and estimates of reimbursable expenses. Broadcast engineers have already begun working on those calculations and are still examining the data from the PN, said Don Everist, president of broadcast engineering firm Cohen Dippell. “We’re still trying to get our arms around it.”
The PN doesn’t provide information about how many LPTV stations and translators will be displaced by the auction. With the data available, it’s now possible to begin studying that, Epstein said Thursday. That’s a question that’s going to occupy many broadcasters, an attorney told us.
The repacking’s effect on stations that didn’t seek to sell their spectrum -- such as low-power TV, radio and some TV stations -- is “a primary concern” for CPB, PBS and America’s Public Television Stations, they said in a news release Thursday. “There could be loss of universal service for significant number of Americans, especially those who live in rural areas."
"NAB also remains concerned about the impact of the auction on hundreds of radio stations co-located on television towers,” it said. The group filed a petition for reconsideration of the transition plan that's still pending. “While today marks a major milestone, the work is far from over,” the association said. “Now the FCC and the broadcast industry face the unprecedented task of moving almost a thousand TV stations -- far more than originally anticipated -- to new channels in very tight time frames.”