Does spectrum auctioning harm consumers? Lessons from 3G licensing

Abstract

Although the auctioning spectrum is generally considered to be highly successful, many countries still rely on beauty contests to assign spectrums. This is often attributed to the negative perceptions about the potential problems that auctions may cause, such as high licensing fees, high consumer prices, a lower incentive to invest in infrastructure, and concerns about market concentration. To address these negative perceptions, this paper estimates the effects of the auctions and the licensing fees for the 3G spectrum on consumer prices, the timing of a new service launch, and the market structure using data from the mobile markets of 21 OECD countries. Although our study uses a relatively small sample and a simple methodology, the results are meaningful since it examines a single service (3G) in OECD countries. Some of these countries have adopted auctions while others have used the traditional beauty contest approach. This combination provides a natural experiment to evaluate the impact of auctions on the mobile telecommunications market. The estimation results show no evidence to support claims of negative effects of spectrum auctions in the mobile communications market. This study calls for more positive action toward spectrum auctions in many countries who seek to improve the efficiency and transparency of spectrum assignment.