Spectrum Licensing & Auctions Karen Wrege, KB Enterprises, LLC iWeek 2009.
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Transcript of Spectrum Licensing & Auctions Karen Wrege, KB Enterprises, LLC iWeek 2009.
Spectrum Licensing & AuctionsKaren Wrege,
KB Enterprises, LLC
iWeek 2009
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Elements of Spectrum Management
Spectrum Allocation Defining Service and assignment rules Assignment Enforcement
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ICASA Bandplan Options
ICASA presented 3 options
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Bandplan Issues
Incumbents occupy 65 MHz so 125 MHz remains
Guard bands will be necessary for TDD & FDD to coexist
Band Plan will require reshuffling to accommodate FDD
Allocation impacts assignment mechanism
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Overview of Assignment Options
First In Time Lottery Beauty Contest Auction “Hybrid” process
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Assignment Options
Per the General Notice, ICASA is considering: A purely comparative evaluation process; or A purely competitive evaluation process; or A combination of the two. For ease of
reference, the Authority shall refer to combination of the competitive and comparative evaluation processes as truncated granting methodology.
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ICASA Assignment Methodology Concerns
Concerns for Comparative Process Opaque and Non-transparent Requires Ranking Applications
Concerns for Competitive Process Risk of Collusion Spectrum acquisition costs being passed through to
consumers
ICASA documents appear to favor the “truncated granting methodology” -- a hybrid approach
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Arguing Against A Beauty Contest
A beauty contest component, even if paired with an auction is problematic:
Difficult to be objective, non-discriminatory and transparent
Litigation risk Difficult to set selection criteria and evaluate. Often favors incumbents Often a lengthy process Because it is a subjective process there is no
guarantee that it will not disqualify an applicant that could build out a network effectively
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Incorporating Social Objectives into an Auction
Strict eligibility requirements Bidding credits for small businesses, disadvantaged
individuals and women New entrant set-asides Spectrum caps for incumbents to promote new entrants Lease fees in lieu of full payment for spectrum licenses Strict build out requirements Establishing objective use or lose spectrum policy
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Auction Components
Definition of product being sold (property rights and responsibilities)
Bidding Auction Deposits (Must be enough to level the playing field and attract serious
bidders) Who is allowed to bid? (Eligibility requirements) How are bids presented? (One time or Multiple rounds) How much must bids be beaten by? (Bid increments)
Information Are current bids revealed? (Hiding bid identities during the auction helps to
reduce strategic gaming)
Are winners identified? (Transparency of process)
Clearing
Who gets what and at what price? (First or Second price)
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Auction Rules Matter
Regulators want bidders to tell the truth, but.. Bidders might do better by lying (e.g., by forming a ring or by
colluding) All auctions types are subject to some sort of manipulation by
collusion among buyers, sellers, and/or auctioneer. Bidders need to be wary of “winner’s curse” (bidder who wins believes
they overpaid) Encourage bidder participation – more competition, reduces ability to
collude. Minimize/eliminate exposure and aggregation risks - bidders that win
some but not all of their desired licenses Allow bidders flexibility to pursue back up strategies without increases
exposure risks
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Choosing an Auction Type
Sequential vs. simultaneous auctions Simultaneous auction takes into account complementarities and
substitutability of spectrum licenses.
Single round vs. multiple round auctions Multiple round allow bidders to help avoid the “winners curse” and allow for
price discovery during the auction.
Simplicity vs. more complex auctions Depends on the number of licenses, bidder sophistication, and degrees of
complementarities and substitutability of the licenses in the auction.
Clock auctions vs. Simultaneous Multiple Round Auctions Clock auctions are generally simple for bidders to participate in but may
require additional measures to deal with overshooting.
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International Auction Practices in 2.5 and 3.5 GHz bands
Most countries have used an auction to allocate spectrum in these bands
Some countries have allocated spectrum nationally, while others have opted for regional allocations
Most countries have auctioned 2.5 and 3.5 GHz bands separately
Spectrum generally will be allocated on a “technology neutral” basis
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International Experiences:
In June 2002, Nigeria held a single round combinatorial auction for 3.5 GHz spectrum
UK and the Netherlands plan to auction spectrum using a combinatorial clock auction with final round stages to choose high bidders and assign specific frequencies. Paired and unpaired spectrum assigned through the auction mechanism.
Denmark recently issued a consultation document proposing a combinatorial clock auction using the CEPT bandplan.
New Zealand in December 2007 chose a SMRA auction method with defined paired and unpaired spectrum blocks in the 2.3 and 2.5 GHz bands
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International Experiences:
Sweden and Norway opted for SMR auctions with switching rules where paired and unpaired spectrum was pre-defined
Italy auctioned 3.5 GHz licenses using a first price sealed bid auction method in early 2008
Germany auctioned 3.5 GHz licenses using a Simultaneous Multiple Round Ascending Auction format
Taiwan used a hybrid “beauty contest”/Auction process Hong Kong used an SMR format where paired and unpaired
spectrum was pre-defined. Jamaica conducted a hybrid “beauty contest”/sealed bid auction
in early 2009. The auction failed to meet the established reserve price.
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Recommendations
Develop auction application without subjective evaluation criteria (no hybrid approach) Minimizes litigation risk Minimizes entry costs
Include self certification language on pre-auction application to include: Eligibility requirements Technical capabilities Financial capabilities Collusion rules
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Recommendations
Facilitate robust competition Consider incentives for new entrants Facilitate Low entry costs to increase competition
Keep it simple Consider assigning 2.5 and 3.5 GHz licenses in separate
processes Implement a simple SMRA auction design that is well tested Use robust commercially available software Make it easy for participants to understand and participate Use a straightforward bidder interface
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Recommendations
Eliminate collusion Establish strict, enforceable anti-collusion rules
Eliminate strategic gaming Do not reveal bidder identities before or during the auction Minimize demand reduction
Keep it secure Encrypt bids
Provide transparency in the process Publish bidder identities after the auction
Thank YouKB Enterprises, LLC
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iWeek 2009