Auctions: what are they good for?

The usefulness of auctions is a perennial problem in spectrum management. This question emerged in last week’s book launch for The Debates Shaping Spectrum Policy, and in a new country profile now available for Spectrum Research Service subscribers.

Everyone seems to agree that auctions are good at revealing how much spectrum is worth and for assigning it to an entity that is willing and able to pay a lot for it. For Professor Gerald Pogorel, Professor Emeritus at Telecom Paris, auctions were good at cracking open mobile markets that were formerly dominated by one incumbent, but thereafter their benefits become more debatable. But for Martin Cave, visiting Professor at Imperial College Business School, auctions are also useful because they eat into rents that operators would capture as excessive profits obtained through spectrum licences. Instead, these sums are used by government for socially useful activities.

These issues are not merely academic. Most countries assign fixed duration licences, and those issued a few decades ago are due to expire in the coming years. Should regulators use auctions to re-assign the spectrum? As we report in a newly updated country profile, Germany has done this before, such as for the 1800 MHz band in 2015, but is no longer so sure.

Regulator BNetzA is considering several different assignment mechanisms for spectrum at 800 MHz, 1800 MHz, and 2.6 GHz. A recent revision to its telecom law allows the regulator to think beyond auctions. Its competition advisory body, however, is urging the regulator to refrain from using this power. Given the large amounts spent on auctions, especially in Germany (such as in 2000 and 2015), this issue is bound to attract a lot of interest.

This week we release updated country profiles for two important markets for 2022:

• France
• Germany

All country profiles are available to Spectrum Research Service subscribers here.