Assuming that this is like a bicycle race with the guy right behind the leader holding back before the sprint, Google better plan on meeting the reserve price at a minimum. FCC has the right to reject if all the bids are below the reserve. Not only that but somebody like Verizon could snipe a last minute bid and throw off Google's game plan.

What I have seen of auctions in the corporate world are two strategies. 1) Do like what is happening now, inch up to it. 2) Stake to the reserve price and see who gets wet feet. Now the latter strategy requires the bidder to have properly assessed that even at the reserve there is a known ROI exceeding the reserve that none of the competitors have fathomed.

So I wonder, does that mean no one has done their homework?

Harold,

There is at least 1 very good reason no one has bid the reserve price for the C block yet — it is not allowed by the auction rules. The rules (and auction software) specifically prohibit jump bids. So the bids must go up gradually. Reading anything into that is folly.

Second, the “little guys” face a big problem later in the auction because of the high reserve prices. Right now, the A block is at 34% of its reserve price and the B block is at 50%. Both are increasing because of competitive bids on the same blocks. Once that stops, if the total is below the reserve, the bidders face a real free rider problem, hoping that the other guys raise their bids. There is no mechanism like the minimum bids for the REAGs on the C block to push them.

I hope that these two realities of the rules help in your musings about what is going on in the auction.

Greg:

First, as always, the reality of jump bids is appreciated. But again, we are not seeing the kind of activity we should be seeing if this were a march to reserve price rather than incrimental bids driven by genuine strategy. But we'll see. It is, after all, still relatively early in the auction.

I think we all agree that the reserve prices were not set in a way to maximize the rationality of the auction, but were designed for political cover and to ensure that the government would get $10 billion. And we may indeed end up paying for that in this auction — especially if the larger players hope to stay below reserve and trigger a reauction in A & B without the build out requirements.

Greg Rosston is spot on regarding the auction rules prohibiting certain kinds of jump bidding with minimum acceptable bids, bid increments, and dollar caps on bid increments, viz., <a href="http://hraunfoss.fcc.gov/ed...">the relevant rules</a>. Part of the problem here is the conflict between politically-mandated revenue maximisation underlying high reserve prices and the desire not to have all the licenses go to large, extremely well-financed incumbents. The result is an extremely complicated set of rules which act to prolong the auction. I don't think that these rules actually effect the outcome they were hoped to effect, but they are the rules we are stuck with. It would have been more effective to impose spectrum caps and forbid large incumbents from participating in the auction, but that was politically undoable, so we are left with half-arsed complexity trying to do an ineffectual job.