Spectrum auction
A spectrum auction is a process whereby a government uses an auction system to sell the rights to transmit signals over specific bands of the electromagnetic spectrum and to assign scarce spectrum resources. Depending on the specific auction format used, a spectrum auction can last from a single day to several months from the opening bid to the final winning bid. With a well-designed auction, resources are allocated efficiently to the parties that value them the most, the government securing revenue in the process. Spectrum auctions are a step toward market-based spectrum management and privatization of public airwaves, and are a way for governments to allocate scarce resources.
Alternatives to auctions include administrative licensing, such as the comparative hearings conducted historically, or lotteries.
Innovation
In the past decade, telecommunications has turned into a highly competitive industry where companies are competing to buy valuable spectrum. This competition has been triggered by technological advancements, privatization, and liberalization. Mobile communication in particular has made many transitions since 2000, mobile technology has moved from second generation to third generation to fourth generation and is now in transition to fifth generation technology.With more providers in the mobile industry, the competition during spectrum auctions has increased due to more demand from consumers. When the United States made the transition in June 2009 from analog to digital broadcast television signals, the valuable 700 MHz spectrum became available because it was no longer being used by analog TV signals.
In 2007, search giant Google announced that they would be entering the mobile business with their highly popular Android operating system and plans for a mobile broadband system.
Google said that they planned to bid for the "C" block of the spectrum auction which correspond to channels 54, 55, and 59 of the lower 700 MHz spectrum and channels 60, 61, 65, and 66 of the upper spectrum 700 MHz which are normally used to construct nationwide broadband services. Around the time of Google's announcement, AT&T and Verizon also announced plans to enter the spectrum auction in order to purchase "C" block spectrum.
Advantages
Advantages of auctions:- A well-designed auction is the method most likely to allocate resources to those who can use them most valuably. Rather than rely on government to assess the merits of competing firms' business plans, an auction forces businesses to put their "money where their mouths are" when they make their bids.
- An auction is more transparent, and gives rise to less political controversy when compared to other allocation mechanisms, since there is no room for subjectivity in assessing whether an undertaking accomplishes criteria for allocation.
- Auctions usually raise important sums of money provided there is competition among many bidders.
Countries
Canada
As telecommunications is an area of federal jurisdiction, Innovation, Science and Economic Development Canada holds nationwide spectrum auctions on behalf of the Canadian federal government. As per existing policy frameworks and statutes like the Competition Act, auctions are designed to encourage competition among telecom companies, and to not concentrate too much regional or economic power in the hands of single or a handful of firms. As such, auctions are generally set up to favour smaller telecom providers, such as setting aside certain wavelengths that the "Big Three" firms—Bell, Rogers and TELUS—are precluded from bidding on, or reserving certain valuable wavelengths for small firms.Canada held its first spectrum auction in 1999, for Broadband Wireless Access spectrum in the 24 GHz and 38 GHz bands.
In May 2008, ISED commenced an auction for 105 MHz of spectrum with 40 MHz reserved for new entrants. The auction concluded on July 23, 2008, after 331 rounds and raised $4.25 billion.
In August 2011, Canada made the switch from analog to digital television, freeing up spectrum in the 700 MHz band for other uses. In February 2014, the country auctioned additional spectrum in the 700 MHz and 2500 MHz bands to the four major telecommunications players in the country and raised over $5.3 billion. Christian Paradis, Minister of Industry at the time, was quoted as hoping that the auctioning of these two bands would help foster more competition in the telecom sector, particularly the wireless sector, where Canada is just beginning to feel the effects of competition from new wireless companies from the 2008 auction.
In order to maximize compatibility and prevent cross-border interference, the FCC in the United States and ISED agreed on August 14, 2015, to coordinate their frequencies in their border zone.
Germany
From 2000 to 2007–31 to 2000-08-18, the German government conducted an auction for 12 frequency blocks for the new UMTS mobile telephony standard. The total of the bids exceeded expectations by reaching the staggering amount of DEM 98.8 billions.In 2010, the highest bid in the German spectrum auction was 1,213 Million Euros for two blocks in the 800 MHz band
India
India was among the early adopters of spectrum auctions beginning auctions in 1991. Despite the early start in auctions, services have been slow to roll out caused by unforeseen problems with the design and rules of the auction. Potential service providers were required to seek foreign partners, as the Department of Telecom felt that no Indian company alone had the financial means to enter the industry. Bidding for all licenses required a two-stage screening process.Auctions did occur in 2015, where the government has obtained a revenue of ₹ 110,000 crore from spectrum allocation.
Ireland
On 2012-11-15 the Commission for Communications Regulation announced the results of its multi-band spectrum auction. This auction awarded spectrum rights of use in the 800 MHz, 900 MHz and 1800 MHz bands in Ireland from 2013 to 2030. The winners of spectrum were 3, Meteor, O2 Ireland and Vodafone. All of the winning bidders in the auction have indicated that they intend to move rapidly to deploy advanced services.Licences were issued in respect of two time slices, the first ending contemporaneously with the expiry of the last existing licence in the 900 MHz band and close in time to the expiry of existing licences in the 1800 MHz band.
The auction consisted of:
- a main stage, in which bidders bid for packages of lots, this comprised:
- *combinatorial clock rounds; followed by
- *a combinatorial sealed bid round; and
- *winner and price determination using opportunity cost pricing;
- an assignment stage, in which bidders bid for specific frequency assignments, this comprised:
- *a sealed bid assignment round; and
- *a negotiation phase in which bidders were permitted to negotiate altered frequency assignments. No change resulted from the negotiation phase.
New Zealand
New Zealand's 1989 Radiocommunications Act of 1989 authorized Radio Spectrum Management to create private property rights for spectrum and to use market-driven allocation mechanisms for the granting of these newly created licenses. Initially, spectrum licenses were sold using a tender system, but the first New Zealand spectrum auction was held in 1996, "making New Zealand the first country to sell rights to use spectrum in this way."An internet-based computer system was developed for the second auction, held in 1998.
Pakistan
Slovakia
During the year 2013 Telecommunications Regulatory Authority of the Slovak Republic concluded a CCA electronic auction for spectrum licences from the 800 MHz, 1800 MHz and 2600 MHz frequency bands. These frequencies are reserved for operation of 4G networks.The auction was accompanied by strict information embargo. Neither the public nor the auctioneers did not know who are the auctioneers nor how many auctioneers participates in the auction. During the primary clock rounds the auctioneers knew only a limited aggregate demand at the end of auction day.
Before the auction the Slovak Republic executed the process of releasing the 790–862 MHz frequency band, defined as a digital dividend for broadband networks to provide electronic telecommunication services. The process of releasing formed a free range of 2 x 30 MHz, which after splitting into 6 blocks was the subject of the auction. The maximum frequency spectrum that could be assigned to one company on the 800 MHz band was 2 x 10 MHz. Reserve price for each block was set at EUR 19 million.
Most frequencies from the 1800 MHz band had been already used to provide public electronic communication services in the Slovak republic. Before the auction three existing national mobile operators had leased 2 x 15.2 MHz each. Remaining fragments of frequencies with a total size of 2 x 20.4 MHz became the subject of the auction. These fragments ranged from 2 x 0.4 MHz to 2 x 10.6 MHz. The Authority created a total of 8 blocks in 7 categories with the largest blocks of 2 x 5 MHz. The reserve price ranged from EUR 200,000 to EUR 2,200,000 per block. The maximum frequency spectrum that could be assigned to one company on the 1800 MHz band was 2 x 20 MHz, thus existing mobile operators could gain only 2 x 4.8 MHz each.
According to ECC decision 2600 MHz band was split into two categories: FDD with 14 blocks of 2 x 5 MHz and TDD with 10 blocks of 1 x 5 MHz each. Reserve price was set at EUR 1.1 million per FDD block and EUR 400,000 per TDD block. In 2600 MHz frequency range no operator had leased the spectrum before the auction. The maximum frequency spectrum that could be assigned to one company on the 2600 MHz band was not limited.
Most of the frequencies were sold to the three existing national providers. The auction brought also a new mobile operator, company called Swan. Total revenue of auction has been EUR 163.9 million that is 15% above the sum of reserve prices. All of the auctioned blocks were sold. The sold licences are valid till 2028.
Successful auctioneers undertook the obligation to enter into a contract with any parties interested in national roaming or wholesale offer.