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The FCC’s Upcoming Broadcast Spectrum Auction: What to Expect

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The FCC’s broadcast spectrum auction

The Federal Communications Commission’s (or FCC) broadcast spectrum auction is expected to take place on March 29. It will consist of two parts: a forward auction and a reverse auction.

In the forward auction, mobile broadband providers will bid for flexible usage of wireless spectrum licenses. In the reverse auction, television broadcasters will give up their usage rights for the 600 Mhz spectrum.

According to a FierceWireless report published last year that cites Moody’s analysts, the broadcast spectrum incentive auction is expected to generate $60 billion in bids.

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Who will participate?

Comcast (CMCSA) intends to participate in the 600 Mhz (megahertz) wireless incentive auction of the broadcast television spectrum. Comcast’s decision to sell spectrum usage rights for its NBCUniversal broadcast television network will depend on whether it gets a good price for giving up its spectrum.

Charter Communications (CHTR) is unlikely to participate in the auction due to the regulatory requirement as a result of its proposed acquisition of Time Warner Cable (TWC) and BrightHouse Networks.

Dish Network (DISH) has filed an application with the FCC to participate as a potential bidder for spectrum.

What will the auction mean for broadcasters and bidders?

If broadcasters do give up their spectrum usage rights in the auction, the cash inflow from the auction would mean they could reinvest in their business or to strengthen their balance sheets.

For bidders like Dish, this auction could provide a valuable spectrum. Dish Network’s chair, co-founder, and CEO, Charles Ergen, stated at the company’s fiscal 4Q15 and 2015 earnings call, “The nice thing about the spectrum build-out is I think that’s interesting is we’re starting to spend a lot more time looking at 5G because you’re probably – realistically when you look at our spectrum being used, it’s most likely to be used in a 5G format by however it gets used and however it gets built out, and so those timelines kind of match up.”

DISH Network makes up 0.21% of the PowerShares QQQ Trust Series 1 ETF (QQQ). QQQ also has 4.7% exposure to the television space.

Next, we’ll take a quick look at some controversy surrounding an FCC decision.

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