The 3.5 GHz band has been a key focus for licensing worldwide, following its positioning as key mid band spectrum for 5G. Major auction processes have been held in Germany, the UK, Italy – which so far has set the high water mark for valuation at over 50 cents per MHz-pop (US) – Spain, South Korea, and Ireland. Others are coming shortly – Portugal, Greece, Canada…

In the US, there are two auction processes focused on this important band. The first out of the gates is the Citizen’s Broadband Radio Service or “CBRS” auction, which began on July 23, 2020 (FCC Auction 105), and which will award 7 blocks of 10 MHz “priority access licenses” (PALs) in each of 3,233 counties across the country. Later in 2020, the C Band auction (FCC Auction 107) will award 14 blocks of 20 MHz in each of 416 partial economic areas (PEA’s).

Clock Auction Process

Being its first auction being run in full pandemic mode, the FCC started the bidding with a two-round per day bidding schedule, now shifting to three rounds.

Opening prices were a very low 2 cents per MHz-pop, recognizing that PAL licenses have an element of sharing with government incumbent users and relatively low power, but also considering that there are many smaller operators that may want to use the frequencies for fixed access. This is particularly the case in many more rural areas, which will also be the subject of the FCC’s Rural Digital Opportunity Fund reverse subsidy auction planned for October 2020.

After the first six rounds the Auction 105 price had only increased to 2.8 cents, representing total proceeds of $519 million (US).

Auction 105 is focused on counties, including all counties in the US. As such the opening bids varied from as little as $1,000 for a block in smaller counties up to almost $2 million in the largest county (Los Angeles). The auction attracted a record 271 bidders.

The format being used is an ascending clock auction where bidders bid on quantities of 10 MHz blocks. While there are seven blocks available, no one bidder can bid on more than 4 blocks.

The auction is far from over and will take many weeks to play out

While some two thirds of the counties are seeing demand for 7 blocks or less, many of the large counties have demand much greater than 7 blocks. Some of the larger counties are seeing demand of 24 to 32 blocks.

Given the limit of 4 blocks per bidder, this means there are at least 6-8 bidders on these counties.

This would tend to indicate that there is considerable bid “parking” going on, i.e. bidders simply sitting on large markets waiting for the right moment to use their bidding units to spread out.

The over-demand on the large markets represents more than enough bidding eligibility to bring demand up to supply on all of the under-demand counties. This is likely to play out later in the auction, once the large counties get closer to their market value – no doubt considerably greater than 2-3 cents.

The pace of the auction could possibly have been quicker if there had been higher opening prices for large counties and/or a higher bid increment for counties that see high demand. As it is auction proceeds are increasing at only 6%-7% per round.

So stay tuned…