Equalizing Competition Among Competitors: A Review of the DOJ's Spectrum Screen Ex Parte Filing

21 Pages Posted: 24 May 2013

See all articles by George S. Ford

George S. Ford

Phoenix Center for Advanced Legal & Economic Public Policy Studies

Lawrence J. Spiwak

Phoenix Center for Advanced Legal & Economic Public Policy Studies

Date Written: May 2013

Abstract

One important concern for the upcoming and highly-complex voluntary incentive auctions for broadcast television spectrum is the degree to which the largest mobile wireless providers will be allowed to participate. Recently, the U.S. Department of Justice encouraged the Federal Communications Commission to engineer the auction to favor smaller providers in an attempt to equalize competition among mobile wireless competitors. In this Bulletin, we review the Justice Department’s analysis and find significant defects. First, the DOJ’s notion of “foreclosure value” is not a sufficient justification for rigging the auction. The efficiency of an auction’s outcome should instead be based on relative “use value,” and there are good reasons to suspect the use value of larger carriers exceeds that of smaller carriers. Economic theory therefore suggests the presumption should be in favor of non-interference. Second, we demonstrate that the DOJ’s proposal is inconsistent with its own depiction of the mobile wireless market, where firms act as Cournot competitors, face spectrum exhaust, and realize a type of economies of scale in the use of spectrum. Published research shows that under such conditions, spectrum exhaust turns the standard antitrust analysis on its head — namely, that more competitors may, in fact, lead to higher prices and lower quality. Third, we show that case law holds that government intervention, whether by the FCC or the DOJ, should not be directed at equalizing competition among competitors, but the DOJ’s recommendation is plainly aimed at doing so. We conclude that the Department’s proposal effectively seeks to return spectrum allocation to the comparative hearing process, where government — not markets — selects deserving entities for spectrum licenses in a process disguised as an “auction” among preselected winners.

Keywords: Federal Communications Commission, Departmernt of Justice, spectrum, incentive auction, public interest, antitrust

JEL Classification: D43, D44, D45, D46, K21, K23, L11, L13, L43, L51, L52, L96, L98, O33, O38

Suggested Citation

Ford, George S. and Spiwak, Lawrence J., Equalizing Competition Among Competitors: A Review of the DOJ's Spectrum Screen Ex Parte Filing (May 2013). Available at SSRN: https://ssrn.com/abstract=2269280 or http://dx.doi.org/10.2139/ssrn.2269280

George S. Ford

Phoenix Center for Advanced Legal & Economic Public Policy Studies ( email )

5335 Wisconsin Avenue, NW
Suite 440
Washington, DC 20015
United States

Lawrence J. Spiwak (Contact Author)

Phoenix Center for Advanced Legal & Economic Public Policy Studies ( email )

5335 Wisconsin Avenue, NW
Suite 440
Washington, DC 20015
United States
202-274-0235 (Phone)
202-318-4909 (Fax)

HOME PAGE: http://www.phoenix-center.org

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