Other aspects of spectrum auction design

Martin Cave; William Webb

doi:10.1017/CBO9781316145708.007

5 - Other aspects of spectrum auction design

from Part II - Economic management of spectrum

Published online by Cambridge University Press: 05 November 2015

Martin Cave and

William Webb

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Martin Cave: Affiliation:
Imperial College London and the Competition Commission
William Webb: Affiliation:
Weightless SIG

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Summary

Introduction

In Chapter 4 we examined the economics of spectrum auctions, considered why auctions have become so prevalent, and looked at the good and bad features of a number of auction variants. In this chapter we look at further processes associated with auction design and implementation.

We begin by examining the logistics of an auction. This includes the invitation and pre-qualification stages, and the subsequent grant of a license. The next issue concerns the design of the lots to be used in the spectrum award; these are based on bidders’ needs, the technology likely to be deployed, and the type of auction being used. We then turn to ways of encouraging a competitive auction and the interaction between the design of that auction and competition law. We end by considering the interaction between auctions and downstream competition.

Auction logistics

An auction is one part of a four-stage assignment process:

an invitation stage,
a pre-qualification stage,
an auction stage, and
a grant stage.

These stages follow a sequence, from promoting awareness of the auction among potential bidders (marketing) to the eventual assignment of licenses to successful bidders (the grant stage). This section describes in greater detail each of the stages involved.

The invitation stage

The invitation stage usually comprises the publication of an information memorandum, containing details about all subsequent stages of the auction, application forms and pre-qualification requirements. This stage is an important part of the overall process as it includes the period in which to market the auction. If revenue is an important criterion, then participation will be important.

Pre-qualification stage

The pre-qualification stage in an auction provides an opportunity for the spectrum agency to screen out “inappropriate” bidders and to learn more about likely demand. This is achieved by setting out criteria that must be satisfied by all prospective “appropriate” bidders before they are accepted as participants. In effect a pre-qualification stage is a hurdle to participation. No comparison is made across bidders, distinguishing it from a beauty contest or comparative selection process.

Type: Chapter
Information: Spectrum Management
Using the Airwaves for Maximum Social and Economic Benefit
, pp. 94 - 112

DOI: https://doi.org/10.1017/CBO9781316145708.007 [Opens in a new window]

Publisher: Cambridge University Press

Print publication year: 2015

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References

[1] See www.acma.gov.au/~/media/Spectrum%20Outlook%20and%20Review/Information/pdf/Auctionguide%20pdf.pdf.

[2] Marshall, R. C. and Marx, L. M., The Economics of Collusion: Cartels and Bidding Rings, Cambridge, MA: MIT Press, 2012.Google Scholar

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[6] Ex parte Submission of the United States Department of Justice: In the matter of Policies Regarding Mobile Spectrum Holdings. Before the Federal Communications Commission. WT Docket No. 12-269 (April 2013), 10–11.

[7] See Ofcom, “Assessment of Future Mobile Competition and Award of 800 MHz and 2.6 GHz,” statement (July 24, 2012), at http://stakeholders.ofcom.org.uk/consultations/award-800mhz-2.6ghz/statement.

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[11] Cave, M. and Webb, W., “Spectrum Limits and Auction Revenue: The European Experience” (April 2013), at http://apps.fcc.gov/ecfs/document/view?id=7520934210.

[12] Myers, G., “Spectrum Floors in the UK 4G Auction: An Innovation in Regulatory Design,” at www.lse.ac.uk/researchAndExpertise/units/CARR/pdf/DPs/DP74-Geoffrey-Myers.pdf.

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[15] BEREC/RSPG on infrastructure and spectrum sharing in mobile/wireless networks (June 16, 2011), available at http://rspg-spectrum.eu/wp-content/uploads/2013/05/rspg11-374_final_joint_rspg_berec_report.pdf.

[16] Milgrom, P., Levin, J., and Eilat, A., “The Case for Unlicensed Spectrum” (2011), available at http://web.stanford.edu/~jdlevin/Papers/UnlicensedSpectrum.pdf.

[17] Indepen, Aegis & Ovum, “The Economic Value of Licence Exempt Spectrum” (January 2008), at www.ofcom.org.uk/research/technology/overview/ese/econassess/value.pdf;

[18] Katz, R., “Assessment of the Economic Value of Unlicensed Spectrum in the United States” (2014), at www.wififorward.org/wp-content/uploads/2014/01/Value-of-Unlicensed-Spectrum-to-the-US-Economy-Full-Report.pdf.

[19] Bykowski, M., Olson, M., and Sharkey, W. W., “A Market-Based Approach to Establishing Licensing Rules: Licensed versus Unlicensed Use of Spectrum” (2008), OSP Working Paper Series, FCC.