I did a bunch of experimental mock auctions as part of a college experimental economics lab. The rules for the auction aren't too difficult or different from many of the auctions that I participated in.
Here's my opinion on some of the rules and their effects: 1) Package bidding (where someone can bid on a group of licenses and wins or loses all the licenses) -- this helps the large, national bidders that see synergy from owning a number of regional licenses. As the minimum required bid for individual licenses fluctuates due to other individual and package bids, a package spreads the cost over the whole set and makes individual breakthrough bids more expensive / challenging. Size and structure of packages allowed can change the dynamics of the bidding process quite dramatically. 2) Activity requirements -- makes sure everyone is bidding or dropping out. The amount you can bid in one round depends on the amount you bid (or were winning) in the previous round. Google can't snipe the whole auction with a $10 bln bid after not making a single bid beforehand. Activity can strongly favor the big players as they can push around smaller players with large package bids while the small bidders are only making very high single or small package bids. Nobody should stop bidding on anything until it becomes clearly unprofitable to do so--activity crucial to securing winning package bids. There was a 100% use-it-or-lose-it activity requirement in the auctions I participated in, but these rules are similar and gross bid oriented vs. license oriented. 3) Bid retraction -- creates a strange second phase of the auction where some bidders pull bids to get packages to shuffle in their favor. There was a penalty for doing so on winning bids, and I remember some people losing money on this or not making much at all due to it. No professional will make that mistake, but the FCC isn't being generous here. 4) Bid incrementing -- nobody can open or continue the bidding with a massive bid compared to the current minimum required bid. This is important as it prevents someone from throwing out a profitable but discouragingly large bid. I started doing this, particularly when I was a national or powerful regional bidder. There's a name to this strategy that I discovered after the fact.
My prediction on who wins: The big players -- AT&T, Verizon, maybe Google A few regional powerhouses might crop of here or there, particularly in more rural regions of the country -- Alltel The FCC / US Government -- pulls in billions of dollars.
Who loses: Smaller national players -- Sprint, T-Mobile (unless the Germans want to go for broke) Cable companies -- their dreams of breaking into wireless data and telephony will die, unless they cut a deal with Google or one of the smaller and more desperate wireless carriers (above). I'm not sure if there's any way that syndicates can form to bid, but that or an after-the-fact deal with Google may be their only hope. If Sprint pulls a coup and wins a major bid, it'll be desperately strapped for cash that Cox, Comcast, et. al. has to offer, but Sprint's going to have trouble winning much spectrum.
Ken Martin's a telco lobbyist, looking to exact revenge on the cable companies for their success in stealing phone and broadband customers from his patrons. I don't claim that it's why the auction is structured this way, but it's clear that nobody went out of the way to encourage diversity in the ownership of different regional licenses.
Unknown: American wireless consumers? Somebody has to pay for these astronomical bids, and the auctions operate like a tax in some senses. You can see the difference between a spectrum-tax free environment and a taxed environment by comparing 2.4 ghz with 1.9 ghz cell phone service. A little of this range could allow some exceptional innovation to come about. The EM spectrum in this country is the property of the general public, not the FCC, regardless of how the FCC behaves.
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I did a bunch of experimental mock auctions as part of a college experimental economics lab. The rules for the auction aren't too difficult or different from many of the auctions that I participated in.
Here's my opinion on some of the rules and their effects:
1) Package bidding (where someone can bid on a group of licenses and wins or loses all the licenses) -- this helps the large, national bidders that see synergy from owning a number of regional licenses. As the minimum required bid for individual licenses fluctuates due to other individual and package bids, a package spreads the cost over the whole set and makes individual breakthrough bids more expensive / challenging. Size and structure of packages allowed can change the dynamics of the bidding process quite dramatically.
2) Activity requirements -- makes sure everyone is bidding or dropping out. The amount you can bid in one round depends on the amount you bid (or were winning) in the previous round. Google can't snipe the whole auction with a $10 bln bid after not making a single bid beforehand. Activity can strongly favor the big players as they can push around smaller players with large package bids while the small bidders are only making very high single or small package bids. Nobody should stop bidding on anything until it becomes clearly unprofitable to do so--activity crucial to securing winning package bids. There was a 100% use-it-or-lose-it activity requirement in the auctions I participated in, but these rules are similar and gross bid oriented vs. license oriented.
3) Bid retraction -- creates a strange second phase of the auction where some bidders pull bids to get packages to shuffle in their favor. There was a penalty for doing so on winning bids, and I remember some people losing money on this or not making much at all due to it. No professional will make that mistake, but the FCC isn't being generous here.
4) Bid incrementing -- nobody can open or continue the bidding with a massive bid compared to the current minimum required bid. This is important as it prevents someone from throwing out a profitable but discouragingly large bid. I started doing this, particularly when I was a national or powerful regional bidder. There's a name to this strategy that I discovered after the fact.
My prediction on who wins:
The big players -- AT&T, Verizon, maybe Google
A few regional powerhouses might crop of here or there, particularly in more rural regions of the country -- Alltel
The FCC / US Government -- pulls in billions of dollars.
Who loses:
Smaller national players -- Sprint, T-Mobile (unless the Germans want to go for broke)
Cable companies -- their dreams of breaking into wireless data and telephony will die, unless they cut a deal with Google or one of the smaller and more desperate wireless carriers (above). I'm not sure if there's any way that syndicates can form to bid, but that or an after-the-fact deal with Google may be their only hope. If Sprint pulls a coup and wins a major bid, it'll be desperately strapped for cash that Cox, Comcast, et. al. has to offer, but Sprint's going to have trouble winning much spectrum.
Ken Martin's a telco lobbyist, looking to exact revenge on the cable companies for their success in stealing phone and broadband customers from his patrons. I don't claim that it's why the auction is structured this way, but it's clear that nobody went out of the way to encourage diversity in the ownership of different regional licenses.
Unknown:
American wireless consumers? Somebody has to pay for these astronomical bids, and the auctions operate like a tax in some senses. You can see the difference between a spectrum-tax free environment and a taxed environment by comparing 2.4 ghz with 1.9 ghz cell phone service. A little of this range could allow some exceptional innovation to come about.
The EM spectrum in this country is the property of the general public, not the FCC, regardless of how the FCC behaves.