Week 6: Spectrum Auctions

The starting point for this week’s discussion is the report Maximizing the Success of the Incentive Auction by Fred B Campbell, who, we are are told is the former Chief of the Wireless Telecommunications Bureau for the US Federal Communications Commission. Who is Fred Campbell? He directs the Communications Liberty and Innovation Project for the libertarian thinktank the Competitive Enterprise Institute.  He is also former President and CEO of the Wireless Communications Association International.

The analysis is funded by the Broadcasters Coalition and who are they you might ask? If you go to the Coalition website under Who Are We? You will see a single, slightly out-of-focus photo of Preston Padden, a former exec at Disney, ABC and Fox.  But who are the members of the Coalition? On the website, we are also told the Coalition is “a group of television stations dedicated to the success of the Federal Communications Commission’s planned Incentive Auction to reallocate spectrum from broadcasting to wireless broadband.  Currently the Coalition consists of more than 70 auction eligible stations weighted toward the largest television markets.”  Who exactly are these members? We are told in their press release: “Consistent with the confidentiality requirements of the Spectrum Act and the confidentiality discussion in the FCC’s Incentive Auction Notice of Proposed Rulemaking, the Coalition will not be disclosing the identity of its Members. “These are ongoing broadcast businesses with employees, advertisers, and viewers. The need for confidentiality is obvious,” said Padden.” (Obvious? I suppose this is a comment on the state of lobbying in America!)

So how does one treat such an analysis? Do the identity of the author and the shadowy funders matters? What part of the analysis do you find useful? If there was bias, how can you identify it?

As noted, in one of my tweets, Timothy B Lee of the Washington Post provides a very clear article on the interests involved in favour or opposed to restrictions. His argument is that there is a strong correlation with size.  Lee has been involved with the Cato Institute, another libertarian thinktank, but should this matter in assessing his article?  You might also want to check out the twitter conversation between Campbell and Lee (@binarybits).

Another question is why are these spectrum actions so popular? A quick trawl through news feeds over the past few months will find activity in countries ranging from Bangladesh, Pakistan and Nigeria to Canada and the Czech Republic. What benefits do countries gain from these allocations and reallocations?

One of the themes in many countries is the ability of spectrum auctions to attract new entrants.  We alluded to the ability for instruments to create barriers to entry but equally policy instruments can encourage new entrants: Hong Kong recently held a new auction which caused an uproar among incumbents since they saw it as a relatively transparent way of carving off some of their property rights and awarding them to China Mobile.  As one of the incumbents said: “It had a chance to get new 3G spectrum when the government auctioned off spectrum in the 850-megahertz and 900MHZ bands in 2011, but lost. Now it wants to take spectrum from me and everybody else. How is that fair?” More generally, how are tensions resolved between efficiency and competition?

Finally, for those who like history and the idea of policy windows in action, I would commend the article by Tom Hazlett in the Journal of Law and Economics where he explore why it took so long for spectrum auctions to turn from idea into reality.

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