First page bid estimates are based on your QS and available data. The estimator doesn't make any distinction for locality (you sell widgets only in Seattle for example) or how many advertisers are currently active. It looks at the whole history of the keyword, everywhere and all time and for variations of your keyword. Therefore, given your current QS and how much you're bidding, it figures you'd need to bid $x.xx to get on the first page. It's the advertisers who are paused that skew the numbers. If you run your campaign, you'll likely see you do get impressions and if there really is only one other advertiser, you'll see your ad position quite high and CPC below the estimated first page bid it estimated.