Spectrum Auction Design

Instructor: Geoffrey Myers, Visiting Professor in Practice, London School of Economics; former Director of Competition Economics, Ofcom

This course will teach participants about key aspects of spectrum auctions, highlighting the opportunities and challenges, examining the important concepts and real-world examples of both successful and failed auctions, and learning through participation in group and individual exercises. Auction objectives will be considered, showing how the efficient allocation of spectrum licenses can contribute to large consumer and wider societal benefits, and the potential tension with revenue-raising which benefits taxpayers but can distort economic efficiency. This tension will be illustrated by exploring different approaches to choosing reserve prices, emphasizing that a commonly made mistake is setting reserve prices too high and leaving spectrum unsold. Then the main auction formats used for spectrum auctions will be described and analyzed, showing the practical design trade-offs to be made when seeking both to facilitate straightforward bidding (such as risks of substitution and exposure) and to provide bidders with disincentives against engaging in strategic bidding (which can come in many forms, including demand reduction, tacit collusion, price driving, and signaling). This analysis will explain why the complications mean that there is no perfect auction design and that the best choices will depend on the objectives and on well-informed expert judgement taking account of the circumstances specific to the country and the auctioned spectrum. Then the course will show how to assess the case for implementing competition measures in the auction to promote downstream wireless competition, such as spectrum caps or reservation, and to provide a balance with the risks of regulatory failure from measures that are too restrictive. Finally, the course will explore advantages and pitfalls of different ways to harness auctions to achieve the important policy objective of wider wireless coverage in rural areas, including through direct procurement, coverage obligations, and innovative auction designs.

• This course is intended for people with a professional interest in spectrum auctions, which could include those at a spectrum regulator involved in designing auction rules or overseeing policy choices, policymakers setting legislation or strategy, and those in the private sector participating in auctions.
• Upon completing the course, participants will have greater understanding of the practical steps involved in designing and implementing spectrum auctions, the key trade-offs that design choices need to negotiate, and the issues where expertise can be especially valuable to promote successful decisions and avoid high-profile failures.
• No prior knowledge of auctions is required, but some basic understanding of radio spectrum would be useful.