Actions for Allocating Spectrum

David Salant, Law and Economics Consulting Group

Auctions have been used to allocate and assign spectrum in over
half a dozen countries on well over a dozen different occasions.
The simultaneous multiple round (SMR) auction format, first adopted
by the Federal Communications Commission, has been used in an
increasingly wide array of circumstances. This paper evaluates the
performance of the SMR in the US, Mexico, and Australia. I also
discuss modificat ions being considered elsewhere, as well as its
limitations. The SMR format has had some outstanding successes,
most notably the US PCS auctions. However, it is a costly and
time-consuming process. SMR auctions often require
four or more months and ove r one hundred rounds to complete. The
larger the number of licenses for sale, the longer an SMR auction
will run. The experience from the US Specialized Mobile Radio
auction, involving twenty frequency bands in each of fifty-one Major
Trading Areas sugg ests that the performance of the SMR format can
be limited for large-scale auctions. In that auction, it was commonly
the case that comparable licenses sold for much different amounts.
Given that the FCC is considering additional auctions,
such as for thou sands of paging licenses, and the desire of
communications agencies throughout the world to introduce
market-based mechanisms to allocate frequency, it is vital to
develop better mechanisms. An auction mechanism that requires 100
or more rounds and over f our months to complete, as has been the
case in the US A&B block, C block, MMDS, and Specialized Mobile Radio
auctions, is not a cost effective mechanism for smaller stakes
auctions. I discuss modifications of the SMR format that have been
introduced and are being considered. I also discuss some factors
that suggest other auction formats might perform better, that is,
provide a more efficient overall assignment.