The Static and Dynamic Inefficiency of Abandoning Unrestricted Auctions for Spectrum: A Critique of Professor Wilkie's Analysis of the M2Z Proposal

32 Pages Posted: 18 Aug 2008 Last revised: 25 Dec 2013

Robert W. Hahn

University of Oxford, Smith School; Georgetown University

Allan T. Ingraham

Economists Incorporated; affiliation not provided to SSRN

J. Gregory Sidak

Criterion Economics, L.L.C.

Hal J. Singer

Economists Incorporated

Date Written: August 15, 2008

Abstract

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.

Suggested Citation

Hahn, Robert W. and Ingraham, Allan T. and Sidak, J. Gregory and Singer, Hal J., The Static and Dynamic Inefficiency of Abandoning Unrestricted Auctions for Spectrum: A Critique of Professor Wilkie's Analysis of the M2Z Proposal (August 15, 2008). Available at SSRN: https://ssrn.com/abstract=1229782 or http://dx.doi.org/10.2139/ssrn.1229782

Robert W. Hahn

University of Oxford, Smith School ( email )

Oxford
United Kingdom

Georgetown University

Georgetown Center for Business and Public Policy
Washington, DC 20057
United States

Allan T. Ingraham

Economists Incorporated ( email )

2121 K St NW
Suite 1100
Washington, DC 20037
United States
202-747-3540 (Phone)

HOME PAGE: http://www.naviganteconomics.com

affiliation not provided to SSRN

J. Gregory Sidak (Contact Author)

Criterion Economics, L.L.C. ( email )

1717 K Street, N.W.
Washington, DC 20006
United States
(202) 518-5121 (Phone)

HOME PAGE: http://www.criterioneconomics.com

Hal J. Singer

Economists Incorporated ( email )

2121 K Street N.W.
Suite 1100
Washington, DC 20037
United States
202-747-3520 (Phone)

HOME PAGE: http://www.ei.com/viewprofessional.php?id=71

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