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May 11, 2006

Air-to-Ground Auction Will Go Into Third Day (Updated)

By Glenn Fleishman

The second day of bidding on the air-to-ground in-flight broadband spectrum auction was halted early for undisclosed reasons: The FCC stopped bidding after the eighth round (four yesterday, four today). The ninth round will start up tomorrow on Monday, May 16. The high bid for the 3 MHz license in the 3/1 configuration (see yesterday’s post and below for more on that) is currently Unison Spectrum, and I don’t expect that to last. You can follow bids and view reports via the FCC Integrated Spectrum Auction System (use Public Access and select Auction 65). (Updated portion: The FCC originally planned to resume bidding on Friday, May 12, but without explaining, has delayed round 9 to start on Monday, May 15. Then it was moved to May 16.)

Verizon, AC BidCo (AirCell’s holding company), and Unison appear to be the only players now bidding on the configuration that most companies think is most valuable. Only one of two licenses in the band will be granted to a controlling interest, thus no company or companies that share controlling interests can own the whole band. Because of this, the 3 MHz + 1 MHz configuration (either C/D or E/F) are most desirable because it allows for the winning bidder to prevent a competitor from having sufficient bandwidth to truly compete. This also means that the 1 MHz license could go for a very tiny amount of money. Provisional winning bids are below $300,000 at present.

Some bidders are still trying for the A/B configuration of two sets of overlapping 3 MHz of spectrum, but that requires a sort of Prisoner’s Dilemma for that to win. The FCC will grant licenses to whichever pair (A/B, C/D, or E/F) generates the most revenue. Thus, a company that desperately wants the A/B set has to either bid high enough to overcome the bid in C/D or E/F for 3 MHz or has to be competing with another desperate A/B bidder.

Because each vendor can offer multiple bids (one per license pair) per auction Unison Spectrum bid $4.33m in round 8—the same as AC BidCo for license C—and Unison also bid $4.5m for license F. That made Unison the provisional winner in round 8. The A/B pair totaled $1.915m + $2.815m = $4.73m, while the E/F pair of Space Data ($0.244m) + Unison ($4.532m) = $4.786m.

This is getting shaved a little fine. There are eight rounds of bidding scheduled for tomorrow Monday Tuesday, and I still think we might see $8m, per my prediction yesterday.

Posted by Glennf at May 11, 2006 11:04 AM

Categories: Air Travel, Spectrum

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