FCC's complex incentive auction could net more than $30 billion

The most sophisticated and complex spectrum auction ever conducted by the Federal Communications Commission is officially underway.

When the entire process comes to an end more than three years from now, big wireless carriers that provide most of our smartphone access should have more bandwidth to delivery services to mobile-hungry consumers.

TV broadcasters by Tuesday night must have made official their intentions to accept the FCC's opening price for the rights to the spectrum they currently use for digital TV broadcasts. Once the agency knows how much spectrum can be made available in this "reverse auction," then, in a few months, the FCC will open up the bidding in the "forward auction" in which companies such as AT&T and Verizon can bid onthe reallocated spectrum in each of 400-plus localities.

Analysts expect proceeds could range from $30 billion to $45 billion for this first-of-its-kind auction. Already, in addition to AT&T and Verizon, T-Mobile, Comcast and Dish Network are on board as potential bidders.

The FCC expects that bidders will provide new wireless services using that spectrum, which is up to 100 MHz nationally in the 600 MHz band and currently used for UHF TV channels. The characteristics of UHF that make it good for TV also work well for wireless communications and data delivery -- the waves can travel great distances and pass through buildings.

This two-part incentive auction "will align the use of the public airwaves to meet America’s 21st century spectrum needs," said FCC Chairman Tom Wheeler in a statement Tuesday. "If broadband Internet service is an engine for economic growth, then mobile broadband has been its booster
rocket, creating a platform for innovation, competition and new markets. The Incentive Auction promises to free up more capacity to meet Americans’ skyrocketing demand for wireless data while preserving the valuable service that broadcast TV stations provide to their communities."

TV broadcasters have the choice of moving to a lower-frequency spot on the spectrum, sharing signals with a neighboring station or giving up broadcasting altogether. While some stations have made their intentions to participate in the reverse auction public, the FCC is not able to announce what percent of the 1,800 eligible TV stations are involved, because of confidentiality protections within the 2012 Congressional action that led to the auction.

As the FCC reorganizes spectrum allocations after the auction, some TV channels may need to be reassigned during the 39-month transition period. Any reassignment requires that the FCC preserve stations' current audience and geographical reach. For more information about the incentive auction, visit the FCC web site.

The spectrum auction will likely "foster a higher concentration of wireless spectrum assets" amongst the largest wireless providers, said Angelo Zino, equity analyst at S&P Global Market Intelligence, in a recent report. Currently, the top four nationwide providers - Verizon, AT&T, Sprint and T-Mobile - combined hold more than 80% of available wireless spectrum.

He expects AT&T to spend at least $10 billion on the auction, with Verizon to spend from $8 billion to $10 billion, and T-Mobile between $6 billion and $10 billion. Zino did not estimate Comcast or Dish's spending.

In a recent report, Goldman Sachs Equity Research estimated that total auction proceeds could top $30 billion, while J.P. Morgan estimated bids would total between $25 billion and $35 billion. Last year, the FCC raked in a record $45 billion in its AWS-3 auction of wireless spectrum.

Still, there's some concern that not enough stations planned to participate in this latest auction. Only one in ten broadcasters expressed an interest in selling its spectrum in discussions in advance of the auction, says Richard Doherty, research director for tech consulting firm the Envisioneering Group. "Will there be a benefit (from the auction)? This could become (FCC Chairman) Wheeler’s folly," he said. "This could become something that (only) balances the budget for some matter of hours or days."

Follow Mike Snider on Twitter: @MikeSnider