June 30, 2009
Evaluating the Spectrum Auction
Last year, the Federal Communications Commission held its largest ever spectrum auction, selling exclusive rights to use coveted wireless frequencies for approximately $20 billion. This turned out to be the largest ever single auction of public property in U.S. history. Aside from its sheer magnitude, the auction of frequencies in the 700 MHz band was notable for the federal government's attempt to use the auction process as a mechanism to value various conflicting public policy goals. For the first time, the FCC set out to ascertain just how much a contested policy goal would cost in foregone auction revenue and vowed to give up the goal if it cost too much.
This use of auctions as a heuristic for valuing public interest goals raises interesting questions about the relationship between markets and policy, and between government as a proprietor of public resources and as a regulator of those resources. I argue that it is possible to use auction results to inform the policy process without elevating revenue goals over other public policy objectives. In the 700 MHz auction, however, the FCC misunderstood what information auctions can yield and then failed to design an auction that would supply even that information. Correcting these problems for the spectrum auctions of the future - what may be the last great "land rush" to obtain wireless resources valued at more than $1 trillion - would lead to a more rational, transparent, and equitable communications policy.
Download the article from SSRN here.
June 30, 2009 | Permalink
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