Spectrum Licensing Auctions Karen Wrege, KB Enterprises, LLC by rlh15131


									Spectrum Licensing & Auctions
          Karen Wrege,
        KB Enterprises, LLC

     iWeek 2009
Elements of Spectrum Management

 Spectrum Allocation
 Defining Service and assignment rules
 Assignment
 Enforcement

ICASA Bandplan Options
 ICASA presented 3 options

Bandplan Issues
 Incumbents occupy 65 MHz so 125 MHz
 Guard bands will be necessary for TDD &
  FDD to coexist
 Band Plan will require reshuffling to
  accommodate FDD
 Allocation impacts assignment mechanism

Overview of Assignment Options

 First In Time
 Lottery
 Beauty Contest
 Auction
 “Hybrid” process

Assignment Options

 Per the General Notice, ICASA is
  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.

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
 ICASA documents appear to favor the
 “truncated granting methodology” -- a hybrid
Arguing Against A Beauty Contest

 A beauty contest component, even if paired with an
  auction is problematic:
 Difficult to be objective, non-discriminatory and
 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

Incorporating Social Objectives into an

   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

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
        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)

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
     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
  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

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.

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
 Most countries have auctioned 2.5 and 3.5
  GHz bands separately
 Spectrum generally will be allocated on a
  “technology neutral” basis

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

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

 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

 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
     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

 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 You
   KB Enterprises, LLC

iWeek 2009

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