Bidding in the FCC's ongoing auction of midband spectrum for 5G slowed significantly this week, pushing some analysts to worry that the event might ultimately fail.

"While we still expect the auction to close, the big drop in demand last week and the slowdown in price this week certainly has us on our toes," financial analysts with New Street Research wrote in a note to investors Wednesday evening.

"Prices have increased slower than we projected," agreed the financial analysts at Credit Suisse.

At the end of 21 rounds of bidding Thursday, the auction has so far raised a total of around $3.6 billion in winning bids. Thus, it's still nowhere near the $14.8 billion it must generate in order to reach its reserve price. That's the amount of money necessary to move existing federal users – likely the US military – out of the band so that 5G providers can start using it.

Figure 1: The Credit Suisse analysts expect the auction to generate $26.5 billion in total bids when all is said and done, well above the $14.8 billion reserve price. The above chart shows bidding in each round, and the total amount of winning bids.
(Source: Credit Suisse)

Although financial analysts had hoped to have a sense of whether the auction would reach its reserve price by the end of this week, now they're speculating that it will take another week of bidding to see whether that will happen.

It's a critical issue for AT&T, which is widely expected to purchase a maximum of 40MHz of spectrum around the country in the auction. Midband spectrum – like what's up for grabs in the auction – is considered ideal for 5G services.

If the auction doesn't reach its reserve price, it will be considered a failure and no bidders will get any spectrum.

The FCC's Auction 110 of spectrum between 3.45GHz and 3.55GHz, which started October 5, has been dubbed the "Andromeda auction" by Light Reading because it sounds cool. As in prior spectrum auctions, the FCC is only releasing the amount and geographic location of each bid and not the identity of the bidder. The agency is expected to release the identity of winning bidders after the auction is over, likely sometime in January.

Bidding in the Andromeda auction dropped significantly at the end of last week, leading some to speculate that Verizon had dropped out. But the Credit Suisse analysts said this week that they don't find that theory "at all credible." Instead, they speculated that it was Dish Network that dropped out of bidding last week.

"We believe that the spectrum has high value in use to Verizon, especially given the heavy traffic requirements of fixed wireless access," they wrote. Indeed, Verizon hopes to significantly expand its 5G Home fixed wireless Internet service by using the midband C-band spectrum it purchased at another FCC spectrum auction earlier this year.

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— Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano