LESSONS FROM THE US INCENTIVE AUCTIONS

By Howard Symons and Paul Milgrom

Consumer demand for wireless communications has exploded, and mobile data usage continues to grow exponentially. Nations and carriers face a major challenge to ensure that the speed, capacity and accessibility of wireless networks keep pace with these demands in the years ahead. Meeting this challenge requires creative solutions for making more spectrum available for mobile broadband through the reallocation of frequencies, spectrum sharing and the authorisation of new secondary uses on bands that are otherwise underutilised for their primary purpose. One such solution is the use of the two-sided “incentive” auction, which uses market mechanisms to identify supply as well as demand. The US successfully used such an auction to repurpose 84 MHz of spectrum from television broadcasting to mobile broadband, which concluded in April 2017. In addition to reallocating a substantial amount of spectrum, the auction produced a surplus of nearly $7 billion, which will be contributed to the US Treasury.
This article discusses the US incentive auction, the challenges related to participation and auction design, and the relevance and applicability of two-sided spectrum auctions outside the US.