The 2016 FCC Broadcast Incentive Auction

Abstract

On March 29, 2016, the FCC initiated its first ever two-sided spectrum auction. The auction closed approximately one year later, having repurposed a total of 84 MHz of spectrum. The "incentive auction" included three primary components: (1) a reverse auction where broadcasters bid on the price at which they would voluntarily relinquish their current spectrum usage rights, (2) a forward ascending clock auction for flexible use wireless licenses which determined the winning bid for all licenses within a given geographic region, and (3) an assignment phase, where winning bidders from the forward auction participated in single-bid, second price sealed auctions to determine the exact frequencies individual licenses would be assigned within that geographic region. The reverse auction and the forward auction together completed a "stage". To guarantee that sufficient MHz were cleared, the auction included a "final stage rule" which, if not met, triggered a clearing of the previous stage and the start of a new stage. This rule led to a total of four stages taking place in the incentive auction before the final assignment phase took place. Even at first glance, the incentive auctions are unique among FCC spectrum auctions. Here we consider the estimated true valuation for these licenses based on market conditions. We further compare these results to more recent outcomes in previous FCC spectrum auctions for wireless services to determine if this novel auction mechanism (or possible strategic behavior in anticipation of the incentive auction) impacted auction outcomes.

Keywords: Incentive Auction, Broadcast Spectrum, Spectrum, Spectrum Reallocation, FCC Auctions

JEL Classification: L5, O3, K2