This study by the Analysis Group’s Robert Earle and David Sosa, in conjunction with Mobile Future, reviews both U.S. and international experience in past spectrum auctions. In anticipation of the FCC’s upcoming 600 MHz broadcast incentive auction, the report identifies serious risks to both consumers and innovation posed by auctions designed with preferential rules for specific companies.
Looking at data from past spectrum auctions in Europe, Canada and the United States, the analysis shows that use of spectrum caps and bidder participation restrictions jeopardizes benefits to wireless consumers.
For example, the report finds:
- Restrictive and preferential participation rules in place for the 1994 U.S. PCS spectrum auctions resulted in lost consumer welfare of as much as $70 billion. Underfunded and unfunded business plans developed by new entrants acquiring set-aside licenses resulted in substantial amounts of spectrum sitting idle for many years.
- Following the PCS auctions in the mid-1990s, all significant, new entry into the US wireless market has been through spectrum re-purposing or M&A.
- In the German 3G auctions in 2000, policies intended to encourage market entry were unsuccessful and resulted in a 10-year delay in the assignment of one-third of the 3G spectrum, delaying its development and the benefits consumers would have otherwise enjoyed.
- In Canada and several European countries, restrictive and preferential policies intended to encourage market entry distorted the auction process and were unsuccessful in expanding the number of sustainable competitors in the marketplace. Initial changes in the competitive landscape were proved fleeting as market forces drove a return to pre-auction market structure with the same number of, or fewer, national competitors.