US mobile operators will not be able to bid for 600 MHz spectrum licences until 2016 after the Federal Communications Commission (FCC) decided to delay the auction, which was scheduled to take place in mid-2015, due to its complex structure. The…
US mobile operators will not be able to bid for 600 MHz spectrum licences until 2016 after the Federal Communications Commission (FCC) decided to delay the auction, which was scheduled to take place in mid-2015, due to its complex structure.
The so-called incentive auction is designed to get broadcasters to surrender their low-frequency spectrum and put it into the hands of telcos to cater for the ever-rising demand for 4G services.
However, some broadcasters have taken issue with the terms of the tender regarding what happens if they do not give up their frequencies, and have launched a lawsuit against the FCC.
Gary Epstein, the chairman of the FCC’s incentive auction task force, said the legal action had introduced uncertainty into the process.
In a blog post on the regulator’s website, Epstein wrote: “We are confident we will prevail in court, but given the reality of that schedule, the complexity of designing and implementing the auction, and the need for all auction participants to have certainty well in advance of the auction, we now anticipate accepting applications for the auction in the fall of 2015 and starting the auction in early 2016.”
This is the second time the auction has been pushed back. When the FCC’s current chairman, Tom Wheeler, took the role last year he quickly delayed the auction until mid-2015. At the time, Wheeler described the auction as sharing the qualities of a Rubik’s cube.
BTIG Research analyst Walter Piecyk said he was not surprised by the delay and thought that the regulator may have pushed it back further.
“That new schedule might be optimistic given the legal challenges of the broadcasters and the weak balance sheets of potential bidders,” he said in a note.
Piecyk added that the hold-up could enable T-Mobile US and Sprint Corp – the two smaller players in the four-player US mobile market – to argue for more favourable bidding rules, which could result in them paying less. It also gives the smaller operators more time to bolster their balance sheets.
Wells Fargo analyst Jennifer Fritzsche said she was not surprised by the decision but still expected the auction to rake in considerable funds for the regulator when it does take place, particularly from Sprint and T-Mobile which require more low-band frequencies.
In spite of the 600 MHz auction setback, the FCC is still on track to sell AWS-3 spectrum next month. Telcos Verizon Communications, AT&T and T-Mobile, and satellite operator Dish Network are all expected to bid in the process, which kicks off on 13 November. The FCC is hoping to raise at least US$10.7bn.
