FCC Spectrum Auctions Explained

Bidding online

It can be easy to place value on physical things that we can see and modern auctions bring this to the forefront of our existence. A variety of industries from automobiles to collectibles to real estate and more use auction-style marketplaces, but what about the things of value that we can’t see?

Everyday we use something valuable that is invisible, yet all around us; airwaves full of electromagnetic spectrum capable of sending and receiving information. The wireless industry adds hundreds of billions of dollars to the economy every year, so it should be no surprise that purchasing the right to use the spectrum that makes their services possible is kind of a big deal. The Federal Communications Commission (FCC) oversees the regulation of many forms of communications in the United States with spectrum being no exception. 

Auctions allow organizations that meet certain criteria the opportunity to purchase the use of U.S. spectrum to transmit and receive the signals of their network. As the demand for wireless communication grows with more population and more devices, so does the need for additional spectrum waves for providers. This is where auctions come in. 

The FCC auctions can be a bit convoluted and hard to understand, so we’ve broken down how the auctions work. Get to know how the FCC uses spectrum auctions to help regulate demand while providing companies with the access they need. 

Who is Eligible for Bidding?

Becoming eligible to bid in a spectrum auction is less complicated than you might think. Any individual or organization is capable of eligibility but must follow a few guidelines:

  • A bidder’s first step is filling out an FCC Form 175 application which must be submitted electronically 45 days before the auction.
  • If accepted, bidders receive the information about the licenses up for auction. Bidders must then place their payment upfront as a refundable deposit to hold their spot in the auction.
  • Those wishing to participate must pay for various bidding units. Bidders must purchase the bidding units that are associated with each license and purchase enough units to be capable of lasting through multiple rounds of auction. 

If your form is accepted and can purchase enough bidding units, you can participate in the FCC auction. So, while anyone can enter, there are barriers to entry, primarily, the money it will take to cover deposits and bidding.

Frequency Licenses for Sale

The licenses that are a part of the bidding units are frequency licenses that grant those who win the right to access particular frequencies within the electromagnetic spectrum being offered. Auctions come into play when multiple organizations or individuals want access to the same spectrum band. Owners can lose their licenses should they violate the FCC rules for operating.

Not all FCC licenses require an auction but in areas of increased competition, auctions provide organizations to win licenses through bidding. Licenses are organized by the FCC into different categories that are dependent on geography:

Economic Area Groupings (EAGs), a total of 6 areas consisting of all 50 states and U.S. territories.

Major Economic Areas (MEAs) are made up of 176 areas which are smaller territories throughout the United States and its territories.

Cellular Market Areas (CMAs) help regulate licenses given for cellular systems.

And finally, Regional Economic Area Groupings (REAGs), which are similar to EAGs.

Depending on where spectrum will be distributed will depend on the license needed to secure the right to use it. In regards to 5G networks, while promising fast speeds, the signals do not travel very far. This means many towers are needed to cover service areas for 5G networks to not only meet demand but simply work. The battle between wireless carriers continues to heat up as providers race to cover the nation with the fastest wireless speeds we have ever experienced. 

How Wireless Companies Bid on Spectrum

No need for fast-talkin’ auctioneers or a sea of paddles waiting to be raised, FCC spectrum auctions occurs online. Which is probably a good thing because they can take up to months to finalize. The FCC uses simultaneous multi-round auctions through its online Integrated Spectrum Auction System (ISAS) which allows all of the licenses available to be bid on at the same time through the Internet. Licenses are placed into rounds which each have an expiration period; however, there is no limit on the number of bidding rounds that may occur, which is why auctions can last as long as they do.

With so many licenses going up for bid at once, it can be a bit much to keep track of and organize. This is why the FCC uses package bidding which provides bidders the opportunity to bid on multiple licenses as a package deal. Bidding is anonymous until the end of each round where prospective buyers can then make adjustments going into the next round. Each round of bidding sees a 10% increase in the previous round’s highest bid.

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Images sourced from the FCC.