WASHINGTON-Despite concern about the potential for collusion at the upcoming advanced wireless services auction and the need to head off any problems by limiting bidder information, federal officials admit they have pursued only a handful of cases where suspected abuse led to enforcement action.
Nevertheless, the Justice Department, the Federal Trade Commission and some academics are backing a Federal Communications Commission “blind bidding” proposal roundly criticized by large and small wireless telecom firms throughout the country.
Despite the avalanche of opposition to how more than 1,110 wireless licenses are set to be auctioned beginning June 29, there appears so far to be little indication the FCC is looking to change course. Indeed, according to an FCC source, the blind bidding plan was not vetted among the commissioners but rather was a product of the Wireless Telecommunications Bureau that has the blessing of FCC Chairman Kevin Martin.
Fred Campbell, a wireless advisor to Martin, did not return a call for comment.
Despite the past success of the FCC’s auction program, and emulation by other nations, federal officials have built a case for releasing only lead bid amounts and keeping bidder identities secret on relatively few cases litigated by the Justice Department and on some scholarly papers.
“In Auction No. 11 for the D, E and F blocks for [personal communications services] spectrum, Mercury PCS used the last few digits of its bids to identify a specific [basic trading area] and thereby to signal to another bidder, High Plains Wireless, that unless High Plains ceased bidding on a block of spectrum in the identified BTA, Mercury PCS would bid up the price for spectrum in another BTA that High Plains sought to buy,” said the Justice Department in a corrected filing with the FCC last week. “The FCC considered imposing forfeiture liability on Mercury PCS for engaging in this type of `reflexive’ or code bidding, and later changed its auction procedures to require bidding in pre-established increments to end this type of signaling.”
Justice added there are other means whereby one bidder can signal its intentions to another in an auction.
However, a maxim widely held among gaming theorists is that the more information the better in spectrum auctions.
In a 1997 paper, auction expert Peter Cramton wrote: “An essential advantage of opening bidding is that the bidding process reveals information about valuations. The information promotes the efficient assignment of licenses, since bidders can condition their bids on more information. Moreover, to the extent that bidder values are affiliated, it raises auction revenues (Milgrom and Weber 1982), since the winners curse is reduced. Bidders are able to bid more aggressively in an open auction, since they have better information about the item’s value.”
While Cramton was touting the advantages of open bidding over a single sealed bid, the emphasis on information disclosure remains relevant.
The Justice Department, which now worries about collusion in the AWS auction, first investigated and later allowed huge partnerships among the nation’s largest landline telephone, wireless, long distance and cable TV operators in the first broadband PCS auction that began in late 1994 and ended in March 1995.
“The department closely monitored the initial A & B block auction to protect the competitive integrity of the auction itself, and to ensure a competitive structure thereafter,” Anne Bingaman, former Justice antitrust chief, told a House oversight and investigations subcommittee on Oct. 12, 1995.
Bingaman said one check on anti-competitive behavior at that time was an FCC rule limiting the amount of spectrum an existing cell phone operator could hold in a given market.
The FCC eliminated that spectrum cap rule in 2003. RCR
