Shapiro releases study on spectrum auction design

Posted by on April 30th, 2013, 10:30 am

The Center is pleased to announce Robert Shapiro, Douglas Holtz-Eakin and Coleman Bazelon have released “The Economic Implications of Restricting Spectrum Purchases in the Incentive Auctions.”  Center Executive Director John Mayo wrote the following forward to describe the study:

The rapid spread and quick adoption of wireless broadband technology is transforming the way our economy operates. Consumers and businesses alike are using a wide range of mobile devices and technologies to change the way they conduct their daily affairs.   But the continued success of this revolution, and it is nothing less, is contingent on the availability of the essential fuel known as radio spectrum.    The Federal Communications Commission, in its National Broadband Plan, identified the need to allocate more spectrum for wireless services as one of America’s most important priorities.

 

Given the critical nature of spectrum policy, I am delighted that the Center on Business and Public Policy is able to share a new study that examines FCC plans for an “incentive auction” next year to reallocate spectrum from television broadcasting to wireless broadband services.    The study specifically considers whether auction rules that could limit the bidding rights of the nation’s two largest wireless service providers would make for an efficient auction that enables spectrum to be put to its highest value and most productive use.

 

In chapter one, Douglas Holtz‐Eakin and Coleman Bazelon report that restrictions on participation will mean a less robust and competitive auction and reduce auction revenues by as much as 40 percent – a significant shortfall that could mean that the FCC is unable to purchase the full amount of spectrum made available by broadcasters.    Such a shortage, a total of perhaps $12 billion, could not only mean less spectrum for wireless services, but also could jeopardize funding for the new national network, FirstNet, planned for the exclusive use of public safety personnel. Holtz‐Eakin and Bazelon warn of a “vicious circle of declining revenue and even fewer frequencies reallocated.”

In chapter two, Robert J. Shapiro finds that participation limits “would shift spectrum resources away from some of the most efficient mobile carriers and toward less efficient carriers” which would have significant and negative macro‐economic impacts.    He reports that carriers that are prevented from acquiring additional spectrum to address capacity needs would be forced to deploy other, less effective solutions which would generate additional costs that would be passed along to consumers in the form of higher prices. Such price increases, in turn, would slow the transition to 4G technology and put a damper on employment growth that would otherwise result from the adoption of more advanced technology. He estimates that overly restrictive bidding rights could have an adverse employment effect of more than 118,000 jobs by 2017.

 

I believe this study provides important inputs for informed public discussion and can make a major contribution to the FCC and its stated desired for decisions driven by facts and data. No doubt, the study will and should be subject to deep scrutiny and peer review by other analysts and the Commission itself.    As Executive Director of the Center on Business and Public Policy I am pleased to release these findings for public review and consideration. Let the debate begin.

Read the full piece here.

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