Spectrum Auctions: Lessons Learned from Around the World
The following presentation was delivered by Karen Wrege of KB Enterprises at a South Africa Connect public seminar on the 21st of October 2009.
Spectrum auctions were first introduced in 1989 in New Zealand and since then dozens of countries have used competitive bidding procedures to award spectrum licenses for commercial services. In many places auctions have become the standard for assigning spectrum in commercial bands. Over the last twenty years, regulators have used various auction designs to assign spectrum and a wealth of white papers have emerged that describe auction successes and failures. The founders of Knowledge Based Enterprises (KBE) developed the auction program in the United States for the Federal Communications Commission. From its inception in 1994 until early 2005, Karen Wrege managed all aspects of the program and supporting software platform that was owned and operated by the US Federal government.
Auctions are a popular assignment method where the demand for the spectrum block(s) exceeds the available supply. Auctions have grown in popularity for several reasons, including recouping a portion of the value of the use of the spectrum and utilizing a more objective market-based approach as opposed to a more subjective administrative mechanism for assigning spectrum licenses.
It is important to note that the assignment phase is a small part of the complete realm of effective spectrum management which is seen as having five major components: allocation, service rules, assignment, monitoring and enforcement. To review briefly, the first step involves dividing (in the frequency dimension) the range of usable spectrum into blocks or bands of frequencies called allocations. These frequency allocations, which are often guided by the International Telecommunications Union’s radio regulations, determine the type of use allowed within that block or band. For example, the allocation might be for television broadcasting, land mobile radio systems, or radio navigation systems. The second step is to develop and impose service rules that are associated with a particular allocation. These may include technical rules that specify, for example, how the band is to be channelized to accommodate individual transmitters and the maximum transmitter power that can be used in such a channel within the band. The rules may also include non-technical constraints such as rules that determine who or what entities are eligible to receive licenses or authorizations to operate in the allocation. The third step involves assignments – granting the authority (e.g., in the form of a license) for a specific individual or entity to operate a transmitter on a specific channel at a specific location under the applicable service rules. The fourth step involves monitoring frequency use and compliance with rules, and the final step involves the enforcement of the rules and regulations established for the allocation.
Each of the steps of spectrum management is important and interrelated to the other steps in the process. In effective spectrum management, it is critical for regulators to first define their goals and objectives and create policies in each step identified above in line with those overall goals and objectives. Although they are market-based mechanisms, a spectrum auction alone cannot create a competitive telecommunications market; it is only through fair, transparent policy decisions throughout the entire spectrum management process that a regulator can hope to foster a competitive market for its consumers.
In the presentation, Ms. Wrege will identify some of the goals and objectives that countries have developed for their spectrum management activities, focusing on spectrum auctions as an assignment mechanism, and will give real world examples of success and failure.
Karen Wrege, co-founder of KB Enterprises LLC and founder of Wrege Associates has twenty years experience in implementing high stakes, complex government auctions of non-tangible assets. Beginning in the early 90’s, she developed the first combinatorial auctions for the US government, selling non-performing loans from defunct savings and loan companies for the Resolution Trust Corporation.
In 1994, Ms. Wrege developed the FCC auction program and supporting software system for the US federal government. She managed dozens of auctions for the FCC that resulted in billions of dollars of revenue to the US Treasury. In early 2005, Ms. Wrege began formed a consultancy specializing in auction software and implementation, and currently advises governments and bidders in auction design, conduct and participation. In addition, Ms. Wrege headed a team of telecommunications experts in conducting a global study of spectrum liberalization and the results of the study will be released at www.KBEauctions.com in September.
