How Failed International Experiments with Auction Bidding Restrictions Reveal the Strength of Inclusive Rules that Put Consumers and Innovation First
A new report by Mobile Future makes the case for designing an incentive auction that allows all potential bidders to participate equally. The paper shows that the bidding caps some parties have proposed for the upcoming 600 MHz auction in the United States would be far more restrictive – and more detrimental – than those that have been used in the previous international auctions. It concludes that even less restrictive international bidding limitations have adversely impacted auction outcomes, and delayed the deployment of spectrum, so the United States should maintain its inclusive and non-restrictive approach to auction design.
Examples the paper reviews include:
- When the Netherlands auctioned 2.5 GHz spectrum in 2010, it capped the amount of spectrum certain incumbents could acquire. That auction concluded with only 130 MHz of the available 190 MHz being sold and disappointing auction revenues, which the consulting firm who designed the auction concluded were dampened by the bidding caps. Remarkably, a month later the regulator in Denmark (a country with a smaller population than the Netherlands) declined to impose bidding restrictions in its 2.6 GHz auction – and that unrestricted auction generated fifty times more revenue than the restricted Dutch auction.
- The 2013 multi-band auction in the United Kingdom, which imposed spectrum caps and other bidding restrictions, generated revenues so far below those forecast by the UK’s Office of Budget Responsibility that the government investigated the auction process.
- When Mexico auctioned its AWS spectrum in 2010 there was a set aside that limited bidding on a nationwide 30 MHz license, and all bidders were restricted in the amount of total spectrum they could win. These constraints resulted in one smaller incumbent acquiring the 30 MHz license at the very low reserve price, no new entry, and one 30 MHz nationwide block remaining unsold.
- Spectrum auctions in Denmark, Sweden, India, and Australia between 2010 and 2013, which imposed spectrum caps or limits on incumbents’ bidding, all resulted in low bidder turn-out, spectrum being acquired at or near low reserve prices and well beneath projected prices, and spectrum remaining unsold.