The AWS3 spectrum license auction completed 23 bidding rounds up to yesterday and is far from over. Provisionally winning bids – the amount of money that the FCC would collect if the auction were to end – stood at almost US$30 billion.

AWS3 is the largest auction the FCC has ever run with 1,614 licenses for sale. The auction proceeds are almost 60% higher than the total revenue of the landmark 700 MHz auction held in 2008. And it has largely eclipsed the 2006 AWS1 auction, which included more spectrum capacity but had total revenue less than half of AWS3 at Round 23.

At Round 19, on November 19, the auction hit an important benchmark value… the paired licenses, which account for 98% of the auction proceeds and $23.7 billion at that time, represented an average valuation of $1.52 per MHz-pop.

The auction thus crossed a very significant threshold.

Just last month the FCC issued a Report – “Incentive Auction Opportunities for Broadcasters” – prepared by Greenhill & Co. The Incentive Auction is focused on re-purposing television station spectrum in the 600 MHz range – so-called beachfront property which is considered to be better spectrum than high-band spectrum, like AWS3.

According to Greenhill, the value of the spectrum in the 600 MHz Incentive Auction would be $1.50 per MHz-pop, which they based on averages in past auctions and transactions.

At the 4th Annual Americas Spectrum Management Conference, on November 12, 2014, LYA presented in the session “Incentive Auctions: Overcoming the key policy and technology challenges”. LYA’s talk focused on the Incentive Auction game that is playing out between Broadcasters as sellers and Telecom operators as buyers. LYA challenged the Greenhill valuation by highlighting that past auction averages are not necessarily meaningful. In particular, values vary dramatically among markets, and more recent auctions – such as the Canadian 700 MHz auction held in 2014 – have seen higher values.

In the Canadian 700 MHz auction, bidders paid US$2.30 per MHz-pop – more than 50% higher than the Greenhill benchmark. And that was a second-price result; as-bid value was even higher.

The incentive auction is a game where both sellers of spectrum as well as buyers participate. Valuations thus have to consider both sides… the buyers of AWS3 are clearly indicating that their value is more than $1.50 per MHz-pop. Of course the incentive auction is likely to generate greater net revenues if the sellers will accept $1.50 when the buyers are willing to pay more.

The implications of the AWS3 auction will become more apparent as the auction unfolds. Stay tuned.