Next time lucky?

Extrapolation is fun! The third stage of the US incentive auction of 600 MHz spectrum has not brought the process to an end – aggregate bids in the forward auction of around US$ 19.7 billion were substantially below the US$ 40.3 billion needed to compensate broadcasters for clearing 114 MHz of spectrum. But it has given us a third data point…  And with it an irresistible temptation to draw a little diagram.


This simple plot shows that the willingness to pay from prospective users of the spectrum has consistently hovered around US$ 180 million per MHz throughout the first three stages. By contrast, the price demanded by broadcasters for clearing the spectrum has come down sharply, from over US$ 685 million per MHz to US$ 373 million per MHz.

Simply extrapolating from these neat straight lines suggests that the market could clear with around 96 MHz of spectrum being repurposed for mobile data use.  This depends of course on the assumption that:

  • bids in the reverse auction reflect clearing costs, and that these costs continue to fall at a similar rate as broadcasters are asked to give up less spectrum; and
  • that there are no strong synergies for prospective users which might be lost as the amount available for mobile use declines further, as this would reduce the amount that bidders in the forward auction are willing to pay.

If these assumptions hold it should be possible to close the gap between supply and demand with a sizeable bandwidth being repurposed for mobile use – though with almost a third of the band continuing to be used for broadcasting…


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