What is incentive auction? What are different stages of incentive auction? The outcome of incentive auction in US by FCC. Presented as part of Techno Economics course at IIIT B.

1. Incentive
Auction
Team Members:
Avuthu Raviteja(IMT2014008)
Gaurav Koley(IMT2014019)
Shashank Motepalli(IMT2014048)

2. Incentive Auction

3. Why now?
•Mobile wireless services
have increased exponentially
in the past 15-20 years
•Spectrum Crunch: potential
lack of sufficient wireless
frequency spectrum needed
to support a growing number
of consumer devices

4. The Output
The additional spectrum reclaimed through the incentive
auction will help increase the speed, capacity, flexibility of
mobile broadband services such as 4G LTE and WIFI-like
networks.

5. Overview of the Auction
The main players to notice are:
● Customers : Through this auction, the customers get
better wireless services than before.

6. ● TV Broadcasters : These are the firms, which need to leave the
spectrum which they are holding now. They will have 3 options
after that,
a. to quit
b. to share with another station efficiently
c. to get another spectrum i.e., to move from UHF(Ultra High
Frequency) to VHF(Very High Frequency)
■ low UHF :- 450-806 MHz low VHF :- 49-108 MHz
■ High UHF :- 900-952 MHz High VHF :- 169-216 MHz

7. •Wireless Service Providers : These are the firms, which
buy the spectrum to provide wireless services.
•Federal Government : After reallocating the spectrum,
the money obtained from wireless service providers
through forward auction minus the money given to TV
broadcaster’s the remaining will be taken by the federal
government. It is estimated that 24 billion dollars will
come to federal government.

8. How it works
Step 1
Reverse Auction
Step 2
Forward Auction
Step 3
Transition of Broadcasting
spectrum to Multi use
licenses

9. First Phase: Reverse Auction
● The TV Broadcasters try to sell their spectrum in
reverse auction.
● Generally the reverse auction occur as Descending
clock Auction.

10. Second phase : Forward Auction
•FCC ask companies interested in buying
spectrum for wireless services
•Reserve Spectrum for smaller companies

11. So, the wireless providers have got what they
want, the TV broadcasters have been paid and
all done?

12. Reverse Auction:
Descending Clock Auction

13. Descending Clock Auction
● Mechanism for buying items from multiple potential sellers
● Price (Clock Price) is decremented over the course of the auction.
● In each round, each seller might accept or decline his offer price.
○ Accepting means the seller is willing to sell at that price.
○ Rejecting means the seller will not sell at that price or a lower price.
● The clock price continues to fall until the number of broadcasting
licenses being offered to sell is just equal to the amount needed to
obtain the target amount of spectrum for reallocation.
● The sellers will pay the exit price of last rejection.

14. Does Descending Clock
Auction induce truthful
bidding?

15. VA
Exit Price for A
Value of the license for A
VB
Exit Price for B
Value of license for B
High
Clock price starts here
VX
W
Exit price of Seller X. Price at which
Sellers A and B sell their licenses.
Let us assume the scenario when 2 licenses are
required and there are 3 sellers X, A, B.

16. Case Study:
What happened
in US?

17. Stages
Congress authorized
the FCC to conduct
incentive auctions,
with the first auction
to be of broadcast
television spectrum.[1]
Auction Application
Filing Window
Deadline
Stage 1 Bidding in
Reverse Auction
begins
Forward Clock
Auction begins
2012 2016: Jan Mar Apr May Jun Jul Aug Sept Oct 2017:
May
[1]https://apps.fcc.gov/edocs_public/attachmatch/DOC-318455A1.pdf
Multi-stage
Spectrum
Allocation
ends

18. Spectrum
84MHz
Cleared by the reverse
auction process
14MHz
Spectrum available for
wireless mics and
unlicensed use
70MHz
Largest amount of
licensed low-band
spectrum ever made
available at auction

19. Reverse Auction “By the Numbers”
175 Winning stations
$304 million Largest individual station payout
$194 million Largest non-commercial station payout
30 Band changing winners(moved to low- or high-VHF)
36 Winning stations receiving more than $100 million
11 Non-commercial stations winning more than $100 million

20. Forward Auction
2,776 License blocks sold (out of total of 2,912 offered)
62 Qualified Bidders
50 Winning bidders
23 Winning bidders seeking rural bidding credits
136 FCC Held licences
Among the largest winners are T-Mobile, Dish, Comcast, and US Cellular.
T-Mobile spent $8Bn to get 45% of the spectrum
Dish-network spent $6.2Bn to get quarter of the spectrum

21. Revenue
$10.05bn
Revenues to winning
broadcast stations
$19.8bn
Gross revenues (2nd
largest in FCC auction
history)
$7.3bn
Auction proceeds for
federal deficit
reduction
Source:
https://auctiondata.fcc.gov/public/projects/1000

22. Thank You