WASHINGTON-In a long-awaited study, two Clinton administration economists say flaws in Federal Communications Commission bidding rules forced firms to pay relatively more for less populated markets in the first broadband personal communications services auction.
The report, prepared by Mark Bykowsky and Robert Cull of the National Telecommunications and Information Administration, was completed last fall but agency lawyers delayed its release because of concern about potential political fallout from the criticism, according to a source.
The document was submitted to the FCC last week together with NTIA’s recommendation that combinatorial bidding be used to assign 220-222 MHz licenses. NTIA also announced the removal of primary federal spectrum allocations on that band.
“By agreeing to remove the Federal government’s co-primary status with respect to these channels, NTIA seeks to increase potentially this spectrum’s value at auction and to promote the availability of this radio spectrum for commercial mobile services,” said Larry Irving, chief of NTIA.
NTIA, a unit of the Commerce Department, manages federal government spectrum and advises the White House on telecommunications policy. The authors of the auction paper said their work does not necessarily reflect NTIA’s views.
“Our analysis indicates that, on average, the auctions involving licenses associated with lowly to moderately populated service areas closed later than licenses associated with highly populated service areas,” said Bykowsky and Cull.
“As a result,” the two economists added, “winning bids tended to be higher than on the latter licenses. These higher prices appear to be caused by unnecessarily restrictive Stage III eligibility rules, which may have introduced an element of bidder non-neutrality into the broadband PCS auctions.”
Indeed, the issue of whether the A- and B-block auction was the smashing success proclaimed by the FCC and White House is open to question.
The auction generated $7 billion dollars, but the 99 licenses sold were spread among only 18 firms-mostly telecommunications giants.
In contrast, the C-block PCS auction that’s winding down has attracted more than $10 billion in bids. As such, there has been the suggestion that the A- and B-block auction was less than competitive, owing in part to FCC rules that allowed regional Bell telephone companies to join forces.
The Justice Department maintains that it monitored the A- and B-block auction for any antitrust activity, but has yet to publicly disclose its findings.
Then there are those who believe auctions are an unnecessary tax on firms, stifling technological progress and business growth. The billions of dollars companies pay for wireless licensees, argue auction naysayers, drain capital up front that otherwise could go toward startup infrastructure build-out and marketing. As such, some prominent firms left the C-block auction when bidding accelerated beyond expectations.
