Spectrum Auctions: Lessons from Around the World

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This overview of spectrum auctions was given by Karen Wrege of KB Enterprises to the South Africa Connect Public Seminar on 21st October 2009.

This overview of spectrum auctions was given by Karen Wrege of KB Enterprises to the South Africa Connect Public Seminar on 21st October 2009.

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  • Spectrum auctions are just a piece of the spectrum management process. They’re not the beginning of the process, in fact they are closer to the end of process. Everything starts with a spectrum allocation and the development of appropriate service rules that include technical and eligibility rules. After licenses are assigned, the regulator must enforce the provisions set out in the service rules.
  • “Lite Licensing” is a novel and progressive frequency allocation and assignment model where licensees pay a relatively small fee for a nationwide, non-exclusive license. The licensees then pay an additional nominal fee for each base station they deploy. All base stations must be clearly identifiable and in the event that these stations cause interference which cannot be mediated by technical means and licensees are required to resolve the dispute between themselves.
  • - Problems with beauty pageants: difficult to create objective criteria, long administrative process, subject to litigationIt is part of a command and control regime -- regulator controlling all aspects instead of letting the market make decisions –
  • Auctions are generally more transparent than beauty contests because of the objective criteria, but transparency also refers to making clear the specifics of the licenses and auction rules well in advance of the auction
  • Unfair or unclear rules just result in legal delays – Brazil, auction delayed by courts because of flawed study for setting reserve prices, then later because of court challenges by wireline carriers who were barred from the wimax auction. The EU has threatened to take Germany to court over a planned auction that may favor incumbents: Germany: October 15, 2009 BRUSSELS (Dow Jones)--The European Commission may take legal action against the German telecoms regulator over concerns its planned auction of digital frequency licenses may harm competition, the commission's telecoms spokesman Martin Selmayr said Tuesday. The commission "is deeply concerned" about the Bundesnetzagentur's decision to ignore the commission's advice on how to ensure fair competition in allocating digital frequency in Germany, Selmayr said. If the commission finds European Union laws aren't respected by the German plan it "will not shy away from enforcing the E.U.'s competition and single market rules in this important context," Selmayr added. The German regulator plans a second-quarter 2010 auction of licenses for frequencies to supply rural areas with mobile Internet access. New entrants to the market E-Plus and 02 have both complained the planned auction will benefit the incumbent mobile operators, the commission said. Under E.U. law national regulators have to allocate radio frequencies for mobile services in an objective and transparent way. They shouldn't try to freeze the competitive situation on the market for the benefit of incumbent operators. The commission takes issue with the regulator's argument that how the digital frequencies are divided "is outside the scope of the E.U.'s competence," Selmayr said. Brazil: Tuesday, September 05, 2006 The ongoing saga of Brazil’s auction of 3.5GHz and 10GHz spectrum licences for WiMAX services took a fresh twist yesterday when the federal accounts court (TCU) ordered a halt to the process citing ‘inconsistencies’ in the tender. Although the regulator Anatel had received 100 preliminary bids from interested parties, the TCU ruled that an economic feasibility study carried out before the auction contained several flaws, not least in using an out of date exchange rate to set the minimum price for spectrum blocks in some regions. According to the TCU’s statement, Anatel set a minimum price of BRL655.71 (USD308.80) for 7MHz blocks in the 3.5GHz band for the cities of Santos and Ribeirão Preto. However, the price is well below the average price of BRL200,000 used for other cities of a similar size. The watchdog has now been given 15 days to amend the minimum price in its licence rules. The courts have also highlighted errors dating back to November 2004 in the exchange rate used for the real and euro currencies. Based on the figures used as against the current exchange rate, the TCU said that there would be a premium of 76% on the price forecast in the auction ruling.

Transcript

  • 1. Spectrum Auctions Lessons Learned From Around the World
    Karen Wrege
    KB Enterprises LLC
    21 October 2009
    kwrege@KBspectrum.comwww.KBspectrum.com
  • 2. Creating A Competitive Telecom Marketplace
    Allocation of Spectrum, Service Rules
    Assignment of Licenses
    Enforcement
  • 3. Approaches to Spectrum Management
    Command
    And Control
    “Property-like” Rights with Flexibility and Trading
  • 4. Regulator Goals in Spectrum Assignment
    Consumer Welfare
    Innovation
    Social Policies
    Competition
  • 5. Typical Spectrum Assignment Mechanisms
    First Come, First Served
    “lite” licensing
    Beauty Contests
    Unlicensed
    Auctions
  • 6. The Problems with Beauty Pageants
    Challenge to create clear, fair and objective comparative criteria
    Long administrative process
    Often subject to challenges by losers
  • 7. The Importance of Transparency
    Allow for input into the process far enough in advance to take action
    Clearly set out technical specifications, rules, procedures and policy
    Allow sufficient time for bidders to prepare
  • 8. The Importance of Fairness
    Know the market
    Know your policy goals
    Find ways to promote a level playing field
  • 9. Canada: Removing Hurdles for New Entrants
    Canada is, at best, a duopoly
    For AWS auction, Canada set-aside spectrum for new entrants
    Spectrum was coupled with mandatory roaming policies
  • 10. Without Transparency ….
    Auctions and the Wrong Kind of Gavel
    Legal delays cause deployment delays
    A transparent and fair process reduces potential of court delays
    Examples :
    Brazil
    Germany
  • 11. Europe’s BIG Auctions
    Big revenue doesn’t always mean a big success.
    High prices paid in Germany and UK caused concern about ability to build out.
    Appears to be a success ultimately , but high prices coupled with bad markets delayed deployment.
  • 12. ThingsTo Avoid
    Untested methods
    Moving too fast
    Not having clear policy goals and knowing the market.
  • 13. Summary