Could Poland’s auction ever have gone right?

After nearly three months of bidding and revenues totalling over €1.7 billion, the Polish ministry has been forced to intervene to end the country’s 800 MHz and 2.6 GHz auction.

Operators are up in arms: three operators are demanding that the Prime Minister reverse the ministry’s decision, while a fourth is threatening to sue for €500 million.

Normally we ask what went wrong in a failed auction but in this case we must ask how it could ever have worked.

For an auction to function properly the bids must be irrevocable: whatever you offer, you must be prepared to pay. But in the Polish auction you could bid, say, €100 million and withdraw it for a penalty of only €1.4 million. You could even choose not to honour it as a winning bid.

What does this mean in practice? Carry on bidding because you can’t lose! Either you win the spectrum at a reasonable price or for a trifling fee you can saddle your competitors with a crippling debt. Giving bidders a get-out clause removes the financial reality check which brings auctions to a natural close.

Debate about auctions often focuses on the best format, forgetting that without the correct rules and procedures, disaster will ensue. This is part of the reason why our forthcoming Spectrum Auctions Masterclass covers not just formats, but administrative structures and legal issues as well.

Finally, let’s spare a thought for the Polish regulator – this ability to withdraw bids is enshrined in the country’s wider legal framework. Their best efforts are doomed until the law is changed.•