The sale of 2.5 GHz spectrum licences in the US got off to a slow start last week and indications are that it will continue in a fairly lukewarm fashion.

T-Mobile US is widely considered to be the only bidder likely to spend serious money in this auction – although never say never in this industry, particularly when it comes to spectrum – and we’re not expecting the US government to bring in the kinds of sums it generated from previous sales.

Nonetheless, it’s going to be an interesting one to watch.

The Federal Communications Commission (FCC) on Friday announced the results of the first round of bidding in auction 108, which brought in gross proceeds of $103.5 million. There are around 8,000 county-level licences up for grabs, it reminded us, in the spectrum range of 2496 MHz–2690 MHz.

That’s not a huge sum of money, in spectrum auction terms, at least. But as spectrum guru Sasha Javid, chief operating officer at BitPath, notes, the cash is not the place to focus here; gauging the progress of this auction is all about demand.

Javid’s analysis of round one shows that demand is, in his own words, “very tepid,” with excess demand as a percentage of aggregate demand coming it at around 37%. To put that figure in context, it is significantly lower than in all recent auctions, including the much-hyped C-band auction, which saw initial excess demand above the 60% mark.

Weaker demand than in previous auctions was not unexpected and there are a number of reasons for it, one of which being that the spectrum licences available are simply less desirable, being overlay licences. That means licence winners will have to negotiate with existing users of the band. Javid estimates that more than 80% of the MHz-POPs in these overlay licences are encumbered in one way or another. In addition, he points out that around 27.5% of the country has no available licences.

Because of the nature of the licences being offered, one player – T-Mobile – has a big advantage over its rivals.

To backtrack a little, the spectrum being sold off is known as Educational Broadband Service (EBS) spectrum, which has its roots in educational use but in recent years has been opened up for broader usage. As it stands, much of the spectrum currently in use is leased out by licence holders to commercial providers – telcos and the like. The one with the most leases being… T-Mobile.

“T-Mobile, as the holder of long-term leases with the large majority of the incumbent EBS licensees, has an information asymmetry advantage over other auction participants,” Javid says. Details of the leases are confidential, which means while T-Mobile knows how long they have to run – and how long a winning bidder might be prevented from either accessing or re-leasing newly acquired spectrum – its rivals do not.

“Moreover, T-Mobile will have a huge incentive to take advantage of this asymmetry to fill-in gaps in its 2.5 GHz portfolio, which it has publicly stated as being the foundation of its mid-band 5G offering,” Javid says.

Meanwhile, major rivals Verizon and AT&T are focusing heavily on C-band for 5G rollout – just last month the former made a lot of noise about adding more spectrum to its 5G sites – and as such are unlikely to play a big part in the auction. “At most, they will participate to ensure T-Mobile has to pay a little more to fill in gaps in major metro areas,” Javid predicts.

There are other players in the auction. The FCC confirmed it has 82 qualified bidders. But there are question marks over most of them, even the likes of Dish and US Cellular.

As such, Javid is reluctant to put a figure on the overall auction, but it’s pretty clear that we’re not heading for a big money spectrum sale. It could still end up being a pretty drawn-out process though.

Round two gets underway later on Monday.

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