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Friday, February 29, 2008: Bidding at the end of Round 129

License MHz Aggregate Total PWBs Aggregate Reserve Delta % of Reserve Total Pops Current Cost per MHz-pop
A 12 $3,949,829,000 $1,807,380,000 $2,142,449,000 219% 285,245,819 $1.15
B 12 $9,136,750,900 $1,374,426,000 $7,762,324,900 665% 284,435,538 $2.68
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 $1,248,533,000 $903,690,000 $344,843,000 138% 285,620,445 $0.73
Total 62 $19,555,473,900 $10,053,350,000
Graph of FCC Auction 73 Daily Proceeds at the end of Round 137

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Graph of FCC Auction 73 New Bids at the end of Round 137

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With an additional two rounds today, the auction increased its daily take by 50% over yesterday, netting more than $7.5M. As can be seen in the first graph, the activity in the E block was the biggest contributor, although each block netted more today than yesterday. It is interesting to note that each block would have netted more proceeds than yesterday even if we had followed a six-round schedule today. So although the number of bids decreased as can be seen on the second graph, the value of bids remained fairly constant and the increase in PWBs increased substantially due to several sustained bidding wars that continued throughout the day.

The pattern in the E block repeated again today, and with the extra two rounds due to the eight-round schedule, it started again. So the bidding on the big licenses today followed a Minneapolis-New Orleans/Las Vegas-Phoenix-Minneapolis pattern. All bids were immediately countered, except for the New Orleans bid, which means that so far this license appears to have changed hands. But at $0.23 per MHz-pop, New Orleans is by far the cheapest of the big licenses recently in play, and it's value in bidding units is roughly half that of Phoenix, so it should be relatively easy for the former winner to bid later in the auction and get it back.

In the A block, as the war for Paducah KY and Guam raged on throughout the day, and there was other activity in the Dakotas and Montana that contributed to a 135% increase in PWBs over yesterday. In the B block, the PWB of a tiny rural license in Wisconsin increased by more than $1.5M when a bidding war was started in last round yesterday, and seemingly ended in the last round today. The license appears to have not changed hands, but was marked up more than 33% in the process.

Please continue to check back on Monday, but be warned that as bidding activity continues to slow down, the level of our analysis will follow. We will continue to post a summary of pertinent results each day, and when significant events occur between now and the end of the auction, we will provide analysis. We will also post graphs two or three times a week. We hope you are finding this information helpful, and have a great weekend!

Thursday, February 28, 2008: Bidding at the end of Round 129

License MHz Aggregate Total PWBs Aggregate Reserve Delta % of Reserve Total Pops Current Cost per MHz-pop
A 12 $3,948,515,000 $1,807,380,000 $2,141,135,000 218% 285,245,819 $1.15
B 12 $9,134,733,900 $1,374,426,000 $7,760,307,900 665% 284,435,538 $2.68
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 $1,244,316,000 $903,690,000 $340,626,000 138% 285,620,445 $0.73
Total 62 $19,547,925,900 $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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Today's net was just over $5M, and again it was driven by continued activity on big licenses in the E block. A quick look at the first graph shows the total value of new bids has remained nearly constant over the past three days, with only some very modest declines revealing themselves today. This is a good indication that the remaining major bidders have been bidding enough to maintain their eligibility levels, and that no major bidders have dropped out lately.

The Denver-Orlando-Phoenix pattern in the E block was altered again today: Yesterday, Orlando was replaced by New Orleans and Las Vegas, and today Denver was replaced with Minneapolis, a slightly bigger but less expensive license. Once again, Phoenix was the third license in the pattern to receive a bid today. So today's pattern was Minneapolis-New Orleans/Las Vegas-Phoenix, and of course all received counterbids. The bidders involved do not seem tired.

It's hard to deny that activity has gotten painfully slow in the A block when the most exciting thing to report is that the big battles of the day were in Guam, North Platt NE, and Paducah KY. Regardless, the block is consistently getting three to five bids per round, so the bidding is far from over. The B block is still receiving 12 to 14 bids per round, and new bids are being placed on various long-idle licenses in almost every round, so this can continue for some time.

As discussed yesterday, the second graph shows a more detailed comparison of bidding activity in late rounds between the AWS auction (Auction 66) and the current, unfinished 700 MHz auction. The dotted lines show the transitions to greater numbers of rounds per day in each auction, and the graph clearly shows that when Auction 66 transitioned to eight rounds per day, activity levels were much higher than current Auction 73 levels. In fact, Auction 73 passed those activity levels about 35 rounds ago, or nearly six bidding days back. Finally this evening the FCC announced a transition to eight round days starting tomorrow, but we feel that they must have had an excellent reason for delaying this transition, because in doing so, they are delaying the government's receipt of roughly $19B. The government is approaching the point in which they could make more money per day on interest than they are making on the auction, so there seems to be some very basic financial reasons that they would want to pick up the pace. As stated previously, we speculate that they may have been buying some time to decide how to handle the D block. We'll see how long it takes to announce the next increase.

Another interesting factoid about Auction 66: When bidding levels in that auction finally dropped way down to just two bids per round for the first time, the auction didn't finish until 28 rounds later. At eight rounds per day that would take 3.5 bidding days. The lowest level of activity that we have seen so far in Auction 73 has been 21 bids per round, so we are a long way from that point. So despite the new eight-round per day bidding schedule, we are still predicting an end-date some time during the week of March 10.

Wednesday, February 27, 2008: Bidding at the end of Round 123

License MHz Aggregate Total PWBs Aggregate Reserve Delta % of Reserve Total Pops Current Cost per MHz-pop
A 12 $3,947,956,000 $1,807,380,000 $2,140,576,000 218% 285,245,819 $1.15
B 12 $9,133,641,900 $1,374,426,000 $7,759,215,900 665% 284,435,538 $2.68
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 $1,240,930,000 $903,690,000 $337,240,000 137% 285,620,445 $0.72
Total 62 $19,542,888,900 $10,053,350,000
Graph of FCC Auction 73 New Bids at the end of Round 123

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Graph of FCC Auction 73 versus Auction 66 at the end of Round 123

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It was another record low for the auction, as the total proceeds today were just $5.4M. However, as predicted yesterday, the general bidding activity trend reversed itself today, as the number of new bids either increased or stayed the same in each round of the day until the last. This can be seen in today's first graph. Once again the E block was most active drawing nearly $4M in new bids, due in part to more bids on several large licenses.

The Denver-Orlando-Phoenix bidding pattern in the E block almost repeated itself today for the fifth consecutive day, the only deviation being that the Orlando license was replaced by a combination of New Orleans and Las Vegas. Together these two licenses are about the same size as Orlando in terms of pops and bidding units (combined they are less than 5% smaller), but the total bid price for both is about a third of Orlando's $30M price tag. So it seems that the bidding in E has in fact moved to smaller licenses as predicted yesterday, and we believe this trend will continue. At six rounds per day, this means that we could be in for a long haul to the end.

In part, today's second chart is the same as a chart produced by the FCC after Auction 66, the AWS auction in 2006 (pdf available here). But we have added the same data for the 700 MHz auction, so that the bidding activity and cumulative revenue of the two auctions can be directly compared on a round by round basis. From this chart, it's clear that the two auctions have been approached very differently by bidders, with Auction 73 featuring much more activity in the early rounds. We believe that the very sudden leveling of revenue in Auction 73 compared to the more gradual leveling in Auction 66 is a function of the special circumstances surrounding the 700 MHz C block (open access, high reserve, Google involvement, AT&T focus in the Lower Band, etc.), and as we have previously speculated, the masterful strategy and execution by Verizon in securing most or all of the six CONUS licenses in the C block. Note that the current bidding activity is a bit higher in Round 123 than AWS was in the same round, indicating that Auction 73 may go more than AWS's 161 rounds. We will provide more detail on the comparison of late-round bidding activity between these two auctions in tomorrow's post.

In Auction 66, the FCC increased the number of rounds per day from six to eight starting in Round 74, and went to ten rounds per day by Round 122. From the second graph it is quite clear that activity levels in Auction 73 are currently well below those of Auction 66 when it was in Round 74, so one could argue that a transition to eight rounds per day is well overdue. The reason that the FCC has delayed the increase is not totally clear, and arguably, it may be related to the very different courses that each of these auctions has taken. But clearly the situation with the D block is a major concern down on 12th Street as it is on Capitol Hill, and this may have reduced the Commission's incentive to speed things along. We will review the next six rounds tomorrow, so please check back...

Tuesday, February 26, 2008: Bidding at the end of Round 117

License MHz Aggregate Total PWBs Aggregate Reserve Delta % of Reserve Total Pops Current Cost per MHz-pop
A 12 $3,947,354,000 $1,807,380,000 $2,139,974,000 218% 285,245,819 $1.15
B 12 $9,132,667,900 $1,374,426,000 $7,758,241,900 664% 284,435,538 $2.68
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 $1,237,089,000 $903,690,000 $333,399,000 137% 285,620,445 $0.72
Total 62 $19,537,471,900 $10,053,350,000
Graph of FCC Auction 73 Daily Proceeds at the end of Round 117

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Graph of FCC Auction 73 New Bids at the end of Round 117

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The auction netted only $6.2M today, another record low number, but certainly not the last. Although daily proceeds continue to decline as shown in the first graph, all indications are that we are still a few dozen rounds from the end, as the day saw more than a few bidding wars continue as well as several new bids placed on long-idle licenses. The second graph shows the number of bids placed, and indicates somewhat of a small resurgence in the A block along with a very slow decline overall, but it is a decline that could easily reverse itself or go flat tomorrow.

For the fourth day in a row, the bidding pattern on the E block licenses of Denver, Orlando and Phoenix was repeated. That is, for the last four consecutive bidding days a bidder has placed bids in the first, third, and fifth rounds of the day on the Denver, Orlando and Phoenix licenses, respectively; and in the second, fourth and sixth rounds, the incumbent has placed the appropriate counterbid. Today, these six bids caused the aggregate PWB of the E block to increase by nearly $4M, or 85% of the E block total and 62% of the entire net proceeds of the day from all bidding. We have to assume that one way or another, this money will be coming from Qualcomm. If this activity suddenly stops, the auction will be quickly be reduced to another level by almost an order of magnitude. But we suspect that rather than stop, this bidding activity may move around to other licenses once the limits on Denver, Orlando, and Phoenix are reached.

A few licenses in the Dakotas are still active in the A block, and B block activity is spread out with pockets of activity in Kentucky, Georgia, Michigan, Virginia, and the Caribbean territories. In addition to the six big bids discussed above, there were a several other bids on E block licenses today that included activity on several licenses in the southwest desert, such as Tucson, Flagstaff & Santa Fe. Other than that, the bidding action in E was generally widespread geographically. In all three blocks there were several new bids today on licenses that had laid idle for many rounds, so the action is continuing to move around.

Apparently the FCC clearly does not share our desire to speed this auction along, so we will have another six-round day tomorrow.

Monday, February 25, 2008: Bidding at the end of Round 111

License MHz Aggregate Total PWBs Aggregate Reserve Delta % of Reserve Total Pops Current Cost per MHz-pop
A 12 $3,946,618,000 $1,807,380,000 $2,139,238,000 218% 285,245,819 $1.15
B 12 $9,131,734,900 $1,374,426,000 $7,757,308,900 664% 284,435,538 $2.68
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 $1,232,546,000 $903,690,000 $328,856,000 136% 285,620,445 $0.72
Total 62 $19,531,259,900 $10,053,350,000
Graph of FCC Auction 73 New Bids at the end of Round 111

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Graph of FCC Auction 73 New Bidding Units at the end of Round 111

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We are now through 22 days of bidding, and the auction is extremely slow and showing few signs of stopping anytime soon. The net proceeds today were only $6.7M, just over $1M per round, but bidding activity was nearly constant. The first graph shows bidding activity, and we have added gray bars representing the total new bids (i.e., the sum of all new bids across all blocks) and this did not continue its downward trend today. Similarly, the second graph shows only a very slight decline in the value of bidding activity. The A block is closest to being finished, having gained only $230K today, and averaging just three bids per round.

The E block was responsible for $5M of today's $6.7M proceeds, partly because the pattern of bids on Denver, Orlando and Phoenix repeated itself for the third consecutive day. With each bid, there was a counterbid, so none of these licenses have changed hands yet. But since this activity started a few days ago, the PWB on the Denver license has increased by $4.4M (or 27%), the Orlando PWB has increased by $4.2M (or 17%), and the Phoenix PWB has increased $3.1M (or 17%). This represents a very significant portion of the recent activity in the auction, so we will see a sudden drop when one of these two bidders gives up.

We don't want to start a controversy, but we just have to wonder: Is it possible that the FCC is intentionally allowing Auction 73 to drag on, perhaps to give them more time to consider what to do with the D block? We're not sure, but looking back at the AWS auction in September 2006, one can see that the FCC increased the bidding from six to eight rounds per day when the number of new bids per round was in the mid-60s and the net proceeds per round was around $6M. If the FCC were using the same metrics in this auction, we would have gone to eight rounds per day last Thursday or Friday. So far there has been no announcement of a schedule change, so tomorrow will be the twelfth day that the auction has used the six-round bidding schedule.

Another interesting comparison with the AWS auction: The number of bids per round in this auction has averaged in the low to mid-30s for the past couple days, but the AWS auction hit this level of bidding activity in approximately Round 90, and did not end until Round 161. So if you consider only this metric, then we should expect another 70 rounds or so. If we continue to use the six-round per day schedule till the end, this means the auction won't end until March 12. But we do believe this is a worst case scenario. Using the metric of net delta of PWBs per round and the AWS auction as a guide, we may only have another 50 to 60 rounds to go.


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