H-Block Auction a Success, Wheeler Says

BTIG analyst Walter Piecyk calculated that Tampa, Fla., was the most expensive market, at $1.07 per MHz/POP, and the top 20 markets sold for “only” 61 cents per MHz/POP. “Dish likely won nearly all of the auctioned licenses, providing it with an additional 10 MHz of nationwide spectrum, in addition to the 40 MHz he already owns in AWS-4 and increasing its aggregate spectrum ownership by 24 percent,” Piecyk said of Dish Chairman Charlie Ergen. “The closing price is pretty strong evidence that this was more of a negotiated deal with the FCC, rather than an auction.” Dish successfully sought relaxed buildout conditions on its AWS-4 spectrum as a condition of meeting the FCC’s reserve price in the H-block auction.

Commissioners disagreed last year about the wisdom of selling the H-block by itself rather than holding it for a later auction, as favored by Commissioner Jessica Rosenworcel (CD Dec 23 p1). Rosenworcel did not have additional comment Thursday.

"With this successful auction, the Commission makes good on its commitment to unleash more spectrum for consumers and businesses, delivering a significant down payment towards funding the nationwide interoperable public safety network,” said FCC Chairman Tom Wheeler, back in Washington Thursday after his trip to Barcelona for GSMA Mobile World, in a statement (http://fcc.us/1lo02xN). “The H-Block auction is a win for the American people,” Wheeler said.

Commissioner Ajit Pai said the auction was the FCC’s first major spectrum auction in six years. “This was no easy task,” Pai said in a written statement (http://fcc.us/1cdlWkE). “In light of once intractable issues surrounding the H Block, the Commission worked together, took steps to ensure that the auction would yield maximum revenue, and refrained from saddling the spectrum with unnecessary conditions. As a result, we have raised $1.564 billion from spectrum that used to be viewed as almost worthless. While I might not have agreed with every single decision that was made in connection with this auction, I believe that commencing this auction in January was the right call."

"This is to the penny the minimum bid amount that Dish has pledged,” said a wireless industry lawyer who has followed the auction closely. “That strongly suggests to me that Dish won all 176 licenses.” The spectrum sold for about 50 cents per MHz/POP across all the markets, the attorney said. “This is $1.564 billion in public safety’s pocket for FirstNet,” the lawyer said. “We're one fifth of the way there today with a piece of crap 10 MHz auction. That’s pretty significant to me.” Dish had no comment.

The auction reached the reserve price a little later than many observers expected. It doesn’t make sense for a company to outbid itself until the last moment, said Felix Wai, a New Street Research analyst. The auction is unique because it involved a small slice of spectrum and a limited number of people were interested in it, he said. “When you consider that it’s next to AWS-4, it really makes sense.” However, the way it played out isn’t surprising, he said. “It’s a result of how Charlie Ergen positioned himself and what spectrum he bought."

The bidding was slow for the last week, said Tim Farrar, a mobile satellite services analyst. “I think the main issue was Dish had one competitor bidding on one or two licenses.” There wasn’t much competition “and Dish didn’t want to pay anymore than they had to or leave that competitor with more licenses than they had to,” he said. It’s possible that a competitor ended up with one or two licenses, he said. “That’s the dynamic that has been at play."

The process and outcome of the H-block auction most likely won’t inform how upcoming spectrum auctions will play out, Farrar said. “We haven’t had the major carriers in this,” he said. “We don’t know how aggressive they're prepared to be on spectrum prices.” But the H-block auction does indicate that financial speculators aren’t necessarily going to be attracted to spectrum worth 50 cents/POP, he said. ,