The Static and Dynamic Inefficiency of Abandoning Unrestricted Auctions for Spectrum: A Critique of Professor Wilkie's Analysis of the M2Z Proposal
Robert W. Hahn
University of Oxford, Smith School; Georgetown University
Allan T. Ingraham
Tilburg Law & Economics Center (TILEC), Tilburg University; Criterion Economics, L.L.C.
Hal J. Singer
Navigant Economics LLC
August 15, 2008
M2Z Networks, Inc. and its consulting economist, Professor Simon Wilkie, have asked the Federal Communications Commission (FCC), when allocating the third block of the Advanced Wireless Services (AWS) spectrum, to abandon the agency's established auction process and instead award that spectrum directly to M2Z. They 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. We find that M2Z's proposal would likely cause substantial economic losses in both static and dynamic economic efficiency.
Number of Pages in PDF File: 32working papers series
Date posted: August 18, 2008 ; Last revised: November 2, 2009
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