Early Bidding Shows Strong Interest in AWS Spectrum

Perhaps the biggest development so far is that SpectrumCo, the joint venture between cable operators and Sprint-Nextel, reduced its eligibility by about $150 million early in the auction. “It’s hard to tell for sure but it would indicate that their ambitions in the auction were less than had been indicated by the amount of their upfront payment,” said a regulatory attorney who’s tracking the auction: “Their upfront payment was enough for them to acquire 40 MHz of spectrum nationwide. Dropping their eligibility, they are no longer able to bid on that much spectrum nationwide, though they can still get a nationwide license.”

But SpectrumCo has remained an active bidder, pursuing some of the largest licenses, including one of the central regional licenses. Wireless DBS, a DirecTV and EchoStar joint venture, has been coming on strong, as expected, and has made 6 of the 15 highest bids, pursuing the big regional licenses. T-Mobile is the highest bidder for 24 licenses, and its bid for a Great Lakes regional license was the highest of any in this auction round. Verizon Wireless affiliate Cellco has bid on only 2 licenses, but they include one of the highest bids so far, for a Southeast regional license.

Analyst Walter Piecyk of Pali Research noted the large number of licenses which have attracted no bids, though he expects that to change as the auction goes on. “Basically half the licenses have zero bids,” Piecyk said. “As you would guess the focus of the bidding is on the regional licenses, which are the D,E,F licenses. The satellite guys who want to put a national network together… are just going after the big national licenses.”

Piecyk said DBS appears to be pursuing licenses that would give it 30 MHz nationwide. “You want to grab a bigger amount of spectrum if your game plan is to do broadband,” he said: “It just looks like the way they're bidding on the 20s and the 10s, they want to put 30 MHz together.” He expects national players to start pursuing the smaller licenses if the bidding gets too hot for the big regional licenses. “Everyone is just trying to maintain their eligibility rather than show their hand about where they're going to get spectrum,” he said: “If one region gets too expensive then they will probably flip back to the local licenses and try to piece them together.”

A regulatory attorney who follows auctions closely said the auction appears very active to date. “It’s surprising that everybody has been so active,” the attorney said. “People are pretty serious about wanting the spectrum. They're putting their money in and there they go. There’s a lot of bidders.” But the source noted that the landscape will change round by round. Bidders also are pursuing different strategies. “One strategy is not to signal necessarily on what you're going after. You go after something else and come around later to what you really want after you've watched that for a while,” the source said. “The other strategy is to go out early and very strongly for what you want and signal to others that you're going to go for that hard.”

A 2nd attorney agreed that the results of the early rounds can be misleading. “It’s difficult to draw conclusions about peoples’ strategy from the bidding in the first rounds of the auction,” the source said. “It’s not certain that someone’s bidding now isn’t just sort of strategic or they may be hiding their true strategy. All you can do is report what the FCC is saying about who the highest bidders are on a particular license. But even that is somewhat worthless. In the event of tied bids the FCC generates a random number to select the provisionally winning bidder.”