The Federal Communications Commission (FCC) has racked up more than three times its expected amount in an ongoing auction for wireless spectrum participated in by wireless providers and other companies.
More than 70 companies in the United States have raised a total of $34 billion on Friday as they bid for six blocks of previously unavailable high-frequency electromagnetic spectrum amounting to 65 megahertz. The figure has blown through the roof of the FCC's estimate of $10.5 billion. It has also broken the FCC's record of $18.9 billion made during its last auction in 2008, when companies bid for low-frequency spectrum, which is more attractive than the high-frequency airwaves currently up for bidding.
The current auction is still ongoing, which means the numbers are still expected to rise as companies outbid each other for additional airwaves. It is believed that the most aggressive bidders are mobile carriers, specifically Verizon Wireless and AT&T, suggesting that companies are scrambling to provide the much desired frequency needed to keep up with the growing demands of mobile consumers.
One of the six blocks up for auction, a 20-megahertz block of paired frequencies covering New York and Long Island, has racked up $1.96 billion in bids on Friday, raising the maximum bid to more than $2 billion when bidding resumes on Monday.
"It's stunning," says Preston Padden, executive director of the Expanding Opportunities for Broadcasters Coalition representing broadcasting companies. "Consumer demand for wireless broadband is on a growth curve that looks like a hockey stick, and carriers are desperate to keep up with that demand."
The unanticipated meteoric response is surprising, given that the spectrum blocks up for auction are high-frequency airwaves. Airwaves located on the higher end of the spectrum are generally less attractive because they are less able to pass through barriers such as trees and buildings. They are, however, more able to carry larger amounts of data, making them more important for the wireless industry.
The high bids come amidst telecommunications companies' backlash against President Obama's call for stronger net neutrality rules, with major carriers and Internet service providers protesting the president's statement by suggesting they will no longer invest in network improvements should they be re-classified as public utilities.
The ongoing spectrum auction, however, shows they are not remiss to make investments. Verizon Wireless and AT&T, the nation's biggest mobile carriers, are expected to be two of the most aggressive bidders, but analysts believe that the "continued rapid rise in bids is a sign that there is a third, or perhaps fourth, large bidder in the auction."
One of these unexpected bidders is likely to be satellite company Dish, which already owns a number of frequencies close to the blocks being auctioned. Dish's stocks have risen 13 percent after Friday's auction as investors realize the company's aggressive bidding implies more value than they expected.
The FCC, along with the National Telecommunications and Information Administration, chalks up the auction's turnaround as a victory because the bidding's results will most likely convince broadcast stations to leave the spectrum blocks they currently occupy and free them up for auction in 2016.
A portion of the sales, around $7 billion, will be used to build FirstNet, a nationwide high-speed network that aims to provide first responders the ability to communicate during emergency response. The rest will be turned over to the treasury.
