Auctions

The two most popular means of granting access to licensed spectrum bands are through spectrum auctions and through so-called “beauty contests.”

The auction method is straightforward: interested parties bid for a given spectrum band; whoever commits the higher sum gets the right to use the frequencies. In theory this method guarantees that the adjudication will be transparent but in practice, transparency has often been circumvented. There have been instances where powerful commercial interests have acquired frequencies only to avoid their used by competition. As a result, highly valuable spectrum was not used. There is also temptation on the part of the government to use this method as a means of revenue generation as opposed to a mechanism for seeking the optimum value of a spectrum band. This is not necessarily a bad thing in itself but arguably counterproductive if the policy goal is increasing access and stimulating competition. As an example, in 2000 auctions in several European countries allocated 3G spectrum auction for mobile phones that resulted in income of 100 billion (100 000 000 000) euros to the government coffers. The massive price paid by operators for this spectrum resulted in reduced resources and increased delays in roll-out.

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