Hahn, Ingraham, Sidak and Singer Find That Unrestricted Auctions Are Still the Most Efficient Way To Allocate Spectrum

August 15, 2008

Allan Ingraham (President, Criterion Auctions), Greg Sidak (Founder, Criterion Economics), Hal Singer (President, Criterion Economics), and Robert Hahn (Executive Director, Reg-Markets Center at AEI) find that M2Z Network’s request for the Federal Communications Commission (FCC) to award them the third block of the Advanced Wireless Services (AWS) spectrum, and thereby abandon the FCC’s established auction process, would generate more costs than benefits.

M2Z Networks, Inc. and its consulting economist, Professor Simon Wilkie, argue that the FCC should embrace M2Z’s business plan because, relative to some alternative use of the spectrum that would emerge from an unrestricted auction, M2Z’s plan would generate significant benefits for broadband consumers. These putative benefits include (1) providing a basic, “free” mobile broadband service to new subscribers, and (2) reducing the price of broadband for existing subscribers. If, contrary to M2Z’s proposal, the FCC does auction the AWS-3 spectrum, M2Z urges the FCC to impose requirements on the winning bidder that mirror M2Z’s business plan. This paper analyzes the benefits and costs of M2Z’s proposal by comparing it with an allocation based on an unrestricted auction of spectrum rights. The authors conclude that M2Z’s proposal would likely cause substantial economic losses in both static and dynamic economic efficiency.

To read the full article, please click here.