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Friday, February 22, 2008: Bidding at the end of Round 105

License MHz Aggregate Total PWBs Aggregate Reserve Delta % of Reserve Total Pops Current Cost per MHz-pop
A 12 $3,946,392,000 $1,807,380,000 $2,139,012,000 218% 285,245,819 $1.15
B 12 $9,130,269,900 $1,374,426,000 $7,755,843,900 664% 284,504,759 $2.67
C 22 $4,748,319,000 $4,637,854,000 $110,465,000 102% 285,620,445 $0.76
D 10 $472,042,000 $1,330,000,000 $(857,958,000) 35% 285,620,445 $0.17
E 6 $1,227,573,000 $903,690,000 $323,883,000 136% 285,620,445 $0.71
Total 62 $19,524,595,900 $10,053,350,000
Graph of FCC Auction 73 New Bids at the end of Round 105

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Graph of FCC Auction 73 Bidding Units per Bid at the end of Round 105

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Proceeds in the A block went temporarily negative today due to a $1.27M withdrawn bid on the A block license for Anchorage AK in Round 101. But then in Round 105, the last round of the day, one of the three bids placed in the A block was a $1.25M bid for Anchorage, helping to bring the total proceeds for the day to $8.5M. This is roughly $3M, or 26% less than yesterday, so the slowing continues. The total for the auction now stands at $19.525B.

As shown in the first graph, bidding in the A block appears to be almost over, with only bidding on Harrisburg PA, Minot ND, and Redding CA keeping things alive throughout most of the day. In the last round of the day the bid for Redding was traded for the Anchorage bid discussed above. But bidding on the biggest licenses in the A block has been over for quite a while, with the vast majority of Top 25 licenses in the A block not receiving bids since February 1. With the exception of Pittsburgh which received a bid as recently as Round 69, none of the other Top 25 licenses in the A block has received a bid since Round 30. Contrast this with the E block in which eight of the Top 25 licenses have received bids since Round 84, and three of those received bids just today. At the other extreme, of the 26 licenses in the E block receiving bids today, 9 of the smallest 22 licenses were included.

The bidding in the E block showed few signs of weakening, and as can be seen in both graphs, activity strengthened in Round 101 as several new bids were placed on licenses that had been idle for several days. Four of these new bids were in Georgia (Macon, Savannah, Columbus, and Albany GA) but there were also new bids on Baton Rouge and Davenport IA. There was also more bidding on some of the top licenses in the E block. We mentioned yesterday a pattern that had developed in which a bidder seemed to be running down a list within the Top 25 E block licenses and placing sequential bids on successively smaller licenses. I speculated that if the pattern continued, we would see bids today on St. Louis, San Diego, and Indy. Well, the pattern did not continue, but rather it repeated itself with successive bid-counterbid cycles again today on Denver, Orlando, and Phoenix. Also in the E block, several multiple license bidding wars continued today in Georgia, the Dakotas, and Illinois, and several other miscellaneous licenses continued to be involved in bid-counterbid exchanges that have been going for several rounds. The cost per MHz-pop for most of the licenses involved is still relatively low, so many of these battles may rage on for several more rounds.

In the B block, most of the action today was in the states of Michigan, Georgia, and Illinois. In addition, the number of licenses receiving multiple bids in a round has decreased over the past few days. When multiple bids are placed on a license it usually implies that there are more than just two bidders interested. On Wednesday, the number of licenses in the B block receiving multiple bids was five, and yesterday it dropped to two. Today, it was down to just one, a Virginia RSA near Norfolk. So it seems that some of the smaller players have been steadily dropping out. As one can see on the first graph, the number of bids per round has been going down, although somewhat unsteadily, so we are approaching the end. My only friend, the end.

Thursday, February 21, 2008: Bidding at the end of Round 99

License MHz Aggregate Total PWBs Aggregate Reserve Delta % of Reserve Total Pops Current Cost per MHz-pop
A 12 $3,945,608,000 $1,807,380,000 $2,138,228,000 218% 285,245,819 $1.15
B 12 $9,127,334,900 $1,374,426,000 $7,752,908,900 664% 284,504,759 $2.67
C 22 $4,748,319,000 $4,637,854,000 $110,465,000 102% 285,620,445 $0.76
D 10 $472,042,000 $1,330,000,000 $(857,958,000) 35% 285,620,445 $0.17
E 6 $1,222,718,600 $903,690,000 $319,028,600 135% 285,620,445 $0.71
Total 62 $19,516,022,500 $10,053,350,000
Graph of FCC Auction 73 Daily Proceeds at the end of Round 99

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Graph of FCC Auction 73 New Bidding Units at the end of Round 99

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The auction slowed dramatically today, as action in the E block subsided throughout the day. The net for the day was just $11.5M, less than half of the daily take for the past five days. Each block netted less today than yesterday, with reductions of 56% and 64% in A and E, respectively, and a smaller reduction of 24% in B. The first graph shows how the last several days compare to each other in terms of net proceeds, and the second graph shows a steady decline in the value of new bids being placed since yesterday morning. Hopefully the trend will continue, so we can look forward to learning the actual results soon.

E block activity has dropped off the most in just about every metric, such as the number of new bids, total new bidding units, net proceeds, etc., so perhaps one of the major bidders has dropped out. Another way to see the reduction is to look at the number of licenses receiving new bids today vs. the past few days. For example, over the past three days of bidding, 26 of the 176 licenses in the A block have received new bids. Of those 26, only 15 (or 58%) received new bids today. In the B block, 83 of the 734 licenses have received new bids over the past three days, and 45 (or 54%) of these received bids today. In the E block, 60 of the 176 licenses received bids over the past three days, and just 24 (or 40%) received bids today.

Despite the big drop in activity in the E block, there were still some bids placed on large E block licenses today, with bid-counterbid cycles on Denver, Orlando and Phoenix. In fact, someone appears to be working their way down the list when the licenses are sorted from biggest to smallest, and it started yesterday with bids on the Seattle license. This bidder has established a pattern of placing a bid, waiting for the counterbid, and then moving down the list to the next biggest license. If the pattern continues, we should see bids on St. Louis, San Diego, and Indianapolis tomorrow.

In terms of covered pops, the majority of bidding action over the past three days in the A block has been in Kentucky, Indiana, and New York, and the majority of activity in the B block has been in New York, Georgia, and Puerto Rico. The biggest licenses to see action today in the A block were Lexington KY, Albany NY, and Evansville IN. In the B block, the biggest licenses to receive new bids today were Utica NY, Binghamton NY, and Ft. Smith AR. In addition, three bids were dropped today which brought the number of licenses held by the FCC from six to nine. These licenses were the A block license for Lubbock TX, a B block license for an MSA in TX just north of Dallas, and a B block license for an MSA in OH on the WV border.

Despite the reduction in daily revenue, the FCC has not yet elected to increase the number of rounds per day, so tomorrow's bidding will follow the same six-round schedule that has been in place since February 8.

Wednesday, February 20, 2008: Bidding at the end of Round 93

License MHz Aggregate Total PWBs Aggregate Reserve Delta % of Reserve Total Pops Current Cost per MHz-pop
A 12 $3,944,138,100 $1,807,380,000 $2,136,758,100 218% 285,620,445 $1.15
B 12 $9,123,617,700 $1,374,426,000 $7,749,191,700 664% 284,747,362 $2.67
C 22 $4,748,319,000 $4,637,854,000 $110,465,000 102% 285,620,445 $0.76
D 10 $472,042,000 $1,330,000,000 $(857,958,000) 35% 285,620,445 $0.17
E 6 $1,216,346,400 $903,690,000 $312,656,400 135% 285,620,445 $0.71
Total 62 $19,504,463,200 $10,053,350,000
Graph of FCC Auction 73 New Bidding Units at the end of Round 93

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Graph of FCC Auction 73 Bidding Units per Bid at the end of Round 93

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The auction netted a little over $26M today, and the distribution of funds between A, B and E looked similar to yesterday, except that the B block contributed $1.5M less today than yesterday. So once again the E block was most active in terms of bidding units and increased PWBs, but not in terms of number of bids placed. This is because several large licenses in the E block received bids throughout the day, including an early day bid-counterbid exchange on San Francisco and an unanswered bid on Boston in Round 90 which may indicate that the license has changed hands, at least temporarily. The increased activity in the day's early rounds is apparent in the first graph, but activity dropped off toward the end of the day.

Today's second graph is new and shows the number of bidding units per bid. This is a good indication of the average size of licenses that are receiving new bids in each round. Note the correlation since Round 82 between A and E. That is, when the average size of new bids in E has increased, the average size of new bids in A has decreased. This appears to more than just coincidence and is an excellent indication that the same bidders are at work in A and E. The correlation breaks down a bit in Round 91, but this can be explained by the fact that a proactive waiver was used in this round. We feel confident that Qualcomm is one of the major players still active, but are starting to wonder if their remaining opponent is another major player, or a multi-headed mix of smaller players.

Today's action in the E block released a few clues as to what may be going on in the E block. A bidder placed bids on the Portland, OR and Seattle licenses in Round 88 today, licenses that have not seen any activity since Round 16 and 18, respectively. Noticeably, Portland and Seattle are two of the major markets that are not included in the 12 MHz of Lower Band C block spectrum that AT&T bought from Aloha back in October 2007, and in fact the Lower Band C block licenses in Oregon and most of Washington State are controlled by Paul Allen's Vulcan Spectrum. So could these bids have been an attempt by AT&T to increase its spectrum position in these markets? Or could this have been Paul Allen trying to get more local spectrum? We feel the former is more likely given just these two options, and that generally there is a good possibility that Mr. Allen is still actively bidding in the auction, but it's not clear how much eligibility he has left and how big his role has been in the E block activity of late. Incidentally, the Round 88 bids on Seattle and Portland were quickly counter-bid in Round 89, and there were no further bids on Portland. Seattle went through another bid-counterbid cycle and then the action switched to Denver, but in all cases the original bidder holding each license retained the prize.

We have speculated that AT&T may be involved in the E block bidding, but this raises several questions. For example, would they really try to go head-to-head with Qualcomm for spectrum in E, when they are about to launch Qualcomm's MediaFLO service to their customers, and MediaFLO will ultimately benefit from this spectrum? We feel while this is possible, it's rather unlikely that AT&T would be responsible for bidding in E on the scale that we have seen. But this implies that there is a large mystery bidder in the E block, unless the large bidder dropped out and has since been replaced by a number of smaller players. In the end, all we can do is make our best guess based on the information that is presented to us, and then be surprised when the actual information is made public. More tomorrow...

Tuesday, February 19, 2008: Bidding at the end of Round 87

License MHz Aggregate Total PWBs Aggregate Reserve Delta % of Reserve Total Pops Current Cost per MHz-pop
A 12 $3,940,834,600 $1,807,380,000 $2,133,454,600 218% 285,620,445 $1.15
B 12 $9,118,695,300 $1,374,426,000 $7,744,269,300 663% 284,720,605 $2.67
C 22 $4,748,291,000 $4,637,854,000 $110,437,000 102% 285,620,445 $0.76
D 10 $472,042,000 $1,330,000,000 $(857,958,000) 35% 285,620,445 $0.17
E 6 $1,198,481,200 $903,690,000 $294,791,200 133% 285,620,445 $0.70
Total 62 $19,478,344,100 $10,053,350,000
Graph of FCC Auction 73 Daily Proceeds at the end of Round 87

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Graph of FCC Auction 73 New Bidding Units at the end of Round 87

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The auction made $28M today, which is consistent with the three previous days (within ±5%). Today, most of the action was in the E block which made over $18M of the day's total proceeds. The first chart shows the daily proceeds since Monday of last week, and shows that although the total is consistent, the distribution of funds between A, B, and E has changed significantly across those four days. This is a good indication that there are still a small number of major bidders involved that are driving most of the action, and implies that activity may be reduced rather abruptly when one of these bidders decides to quit.

There has been a bit of toying with some of the big licenses in the E block lately, namely Boston, San Francisco and Los Angeles. If you are joining us recently, in Round 37 there was an apparent attack waged on a bidder who had been holding several large E block licenses for many rounds, and it appears clear that in most cases only two parties were involved in the battle that ensued. Therefore we have been referring to these bidders as the "attacker," whom we speculate is AT&T or another major bidder, and the "victim" whom we believe is Qualcomm, the bidder most widely believed to have great interest in the E block. So it seems that the attacker has been continuing the war since Round 70 with alternating attempts to take Boston and SF, two of the licenses that the victim appeared to successfully retain when the dust settled back in Rounds 63 & 64. The battle continued this morning as the attacker placed another bid on Boston in Round 82, but then in Round 83, instead of counter-bidding on Boston the victim attempted to regain control of LA. The attacker quickly counterbid in LA in Round 84 and the scuffle moved back to Boston and SF. But the net result of the attempt to regain LA was a big increase in E block proceeds, since the two consecutive bids on LA increased that license's PWB by $8M (from $147M to $155M). In fact those two bids on the Los Angeles E block license represent more than 28% of the total auction proceeds on the day.

Based on the day's events, we feel confident that Qualcomm will finish the auction with at least 40M bidding units worth of licenses. As stated above, we feel that Qualcomm is the bidder we have been calling the victim, and it appears that the victim placed the first bid on LA in Round 83. Given the consistency of the rounds both before and after the consecutive bids on LA, and the fact that the LA license represents 5.3M bidding units, it's safe to assume that the increase in activity of roughly 2M bidding units in Rounds 83 and 84 (shown in the second graph) is entirely attributable to Qualcomm's actions. Therefore, with the 95% activity requirement of Stage 2, this means that Qualcomm must have remaining eligibility of at least 2M/.05 = 40M bidding units. But this figure is likely much more, since at this point in the auction, using 100% of your total eligibility can give valuable information to your competitors.

The FCC has not released an anouncement of an increase in the number of rounds yet, so it seems the six-round schedule will continue tomorrow, although we hope to go to more rounds per day soon.


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