Make the Spectrum Auction Truly Open

When Tom Wheeler takes over at the FCC, one of the first items of business will be decisions on the FCC's guidelines for the much-heralded federal incentive spectrum auction.

In brief, the auction will enable broadcasters to sell off unused spectrum to wireless carriers. The auction needs to raise enough money to incent the broadcasters to sell their spectrum, plus $7 billion to fund a public safety network, with the remainder – potentially billions of dollars – to the U.S. Treasury.

But only, says Duke University economist Leslie Marx, if it’s conducted in “a fair, transparent and inclusive auction.” That fairness, says Marx – a former chief economist of the FCC – is threatened by proposals from T-Mobile and Sprint.

T-Mobile and Sprint are asking the FCC to place limits on the participation of AT&T and Verizon in the spectrum action. According to Marx, “T-Mobile and Sprint claim that more small companies will participate in the auction if Verizon and AT&T aren’t allowed to bid for what they want, and that the small companies will place higher bids than what Verizon and AT&T would have bid.”

Marx conducted an economic analysis which showed that in past auctions, such restrictions would have caused revenue to drop as much as 45 percent. As she writes, barring AT&T and Verizon “...flies in the face of common sense; the empirical results from other government auctions for offshore oil leases, timber and spectrum; and everything eBay has taught us.”

Moreover, Marx notes that “if the FCC restricts Verizon and AT&T from bidding, the auction probably won't raise as much money. Fewer broadcasters will sell less spectrum at lower prices with less new spectrum for mobile broadband and with less cash left over for the government.”  She emphasizes that “if the bidders do not meet the broadcasters' prices, the spectrum goes unsold, and the auction fails.”

Marx adds that “Sprint and T-Mobile – which are not currently experiencing spectrum-constrained networks – want an advantage in obtaining more spectrum, at a discount, by having their toughest competitors barred from the auction...”

Marx argues, and Speed Matters agrees, that such a move would indeed benefit Sprint and T-Mobile but, “...considering the needs of consumers across the country and our nation’s interest in public safety, it makes little sense to anyone else.”

An Open Spectrum Auction Is Best for Consumers and Public Safety (All Things D, Oct. 8, 2013)