Vviewpoints
DOI: 10.1145/2076450.2076458
economic and
Business Dimensions
incentive auctions
The FeDeraL COMMUniCatiOnS Commission (FCC) is charged with managing the wire- less spectrum in the public interest. The U.S. Congress
is considering legislation that would
allow the FCC to conduct “incentive
auctions” (Granted, it is difficult to
think of an auction without incentives, but we seem to be stuck with
the phrase for now.) The most likely
use of such auctions would be to reallocate spectrum from lower value
over-the-air television and satellite
services to more highly valued general mobile wireless services. The
Congressional Budget Office (CBO)
estimated that these auctions could
generate $24 billion in revenue for
the federal government.
Reallocating the valuable spectrum resource could generate substantial benefits to consumers, yet,
there is substantial debate. What is
behind that debate? Mainly it is parties trying to position the auction so
they can secure more of the value for
themselves.
Moving from command and control
Prior to the mid-1990s, the FCC allocated spectrum for specific wireless services such as AM or FM radio, television,
satellite, cellular telephone service,
ham radio, and even ice delivery. Whenever a company wanted spectrum, it
went to the FCC and argued that its
service was extremely valuable and
merited a block of spectrum. But this
was cumbersome. Even when the FCC
agreed with the company’s claims, the
FCC still had to find unallocated spectrum or to reallocate spectrum rights
from existing users. The latter could be
very contentious.
It was also suboptimal. Technological change and change in consumer
preferences is inevitable. Repurposing spectrum can accommodate these
changes and increase welfare.
For example, the original cellular
telephone licenses issued in the 1980s
came from reallocating UHF television
channels 70–83 in the 800MHz band.
The television stations that had been
operating in those bands either applied
for new channel assignments in the
lower UHF channels or shut down. The
initial high demand for cellular service
demonstrated the substantial value of
mobile telephony, and the FCC decided
to allocate more spectrum for mobile
wireless service.
