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Public Interest Test

Continuing our coverage of spectrum auctions, Stefan Zehle explores further the pitfalls and implications for the public purse, drawing on key examples from the past decade.

Public Interest Test

Allocating spectrum to mobile operators by auction is the mechanism preferred by most regulators, and allows a scarce resource to be assigned to those who value it the most, so helping to identify the highest value use and users. However, much depends on the auction format and auction rules, which are usually designed to deliver policy objectives, but there are aspects of these formats and rules that present a high risk of adverse consequences, as they distort spectrum auctions. The common distortions are:

  • The use of set-asides or spectrum caps
  • Excessively high reserve prices and licence payment terms
  • A choice of auction format that does not suit the market conditions in a particular country.

PUBLIC INTEREST CONSIDERATIONS

The public good is best served by policies that advance the following objectives:

  • Efficient allocation: a distribution of spectrum that maximises social utility
  • Transparency of the award process
  • Increased broadband access including for rural and remote customers
  • Innovation and network investment
  • Undistorted competition
  • A high net economic return to the public.

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