Spectrum auctions “a tax on mobile communications”

Bengt Nordstrom, CEO of consultancy Northstream, talks to telecoms.com about the lack of value offered by spectrum auctions and the resultant “tax on mobile communications.”


3 comments

  1. Karen Wrege 29/03/2011 @ 1:09 pm

    It is unfortunate that Bengt Nordstrom focuses on the few auctions (US C Block, and German and UK early auctions) to make the case that spectrum auctions are a tax to providers.

    Auctions are meant to assign the licence to the business that values it most highly and therefore will put it to its highest use. The auctions have allowed for a fair and transparent way to assign spectrum. Thousands of licences have been assigned all over the world quickly and efficiently through spectrum auctions.

    Ofcom is using a second price combinatorial clock auction that will assign the licences to those that value them most highly and creates an incentive for bidders to truthfully express their values.

    I’m not sure what Mr. Nordstrom is suggesting… going back to beauty contests? a lottery system? Auctions are the best way we know (so far) to assign spectrum.

  2. Stefan Zehle 29/03/2011 @ 6:03 pm

    In general I agree with Karen’s comments. However, much depends on auction design and the combinatorial auction with a second price rule appears to produce the best outcomes. There can be surprises of course, as with the Danish 2.6 GHz auction in May 2010. A problem arises when an objective of auction design is to extract the maximum amount of money from bidders. An example is the Canadian AWS auction which made only 50 MHz available to three incumbent bidders, full well knowing that all three would want 20 MHz. Other examples include high reserve prices, as is the case in the forthcoming Portuguese multi-band auction, or simply making very little spectrum available, as was the case with the Indian 3G auction.

  3. Rupert Baines 30/03/2011 @ 2:24 pm

    I have to say, I like auctions.

    As Karen points out, there are details about how you run the auction to get the best outcome.

    But the principle that a valuable asset should be sold at a market price seems fair enough to me. Before an auction, hat spectrum belongs to the state: as a tax-payer, I own my share.

    And I don’t want it given away for less than it is worth to someone purely because they ‘deserve it’ or they have a friend in the ministry.

    Auctions are fair and open, the way markets are supposed to be.

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