You can almost smell the blood. It’s pre-auction season. And this year, with some decent spectrum up for grabs in the AWS auction set for June, the battle should be intense. As such, a number of interests are pressuring the government to change some auction rules. And the Federal Communications Commission itself wants to tweak the rules a bit in a way it believes would improve the auction.
At the forefront though are two proposed changes to the auction system: closing what some see as a loophole that allows large carriers to partner with small business in order to receive highly sought-after bidding credits and rules that would make the auction blind.
The FCC should exercise caution in changing any auction rules. Making the auction blind seems especially troubling. The FCC wants to try to circumvent anti-competitive bidding behavior, or collusion, by keeping secret key information about bidders and their bids until the auction closes. The highest bidder would know it won the round, but other bidders would only know the bid amount.
Cellular pioneer Craig McCaw bid through 100 rounds for lucrative New York and California markets in the A- and B-block PCS auction in the 1990s and walked away with nothing. Did McCaw want that spectrum-where Nextel, in which he invested heavily, was building out-or was he just trying to make everyone else pay a premium? We’ll never know. McCaw certainly had shown he could build out a network.
Another question: If McCaw did bid up those licenses, was the public harmed?
It’s nearly impossible to judge someone’s motives. If Cingular forces T-Mobile USA to pay more for a market where T-Mobile USA desperately needs spectrum and Cingular doesn’t, is Cingular playing unfairly? Who’s to say? If Cingular ends up with the market and pays dearly for it, did that harm T-Mobile USA? Likewise, do these rule changes unfairly benefit carriers like T-Mobile USA that didn’t bid enough in previous auctions and are therefore spectrum starved?
Rural carriers have argued they need to know who the highest bidder is in a market so they can accurately guess whether they would be able to roam in that area. I also worry that the larger companies, because they have more resources, would be better able to accurately guess what their competitors are doing. Smaller players wouldn’t have that luxury.
At its most basic, the company willing to pay the most values the spectrum the most. And the value a company places on spectrum is directly tied to how its competition values the spectrum. You can bet if Direct TV started to bid aggressively, cable companies would value that spectrum a little more.
