3 Pages Posted: 6 Dec 2002
Date Written: August 16, 2002
Fifteen scholars on auctions and telecommunications regulation urge the FCC to cancel bids made in, or permit winning bidders to opt out of, the reauction of the NextWave licenses in Auction 35.
For auctions to function efficiently, buyers and sellers must follow basic rules, including the rule that a seller deliver in a timely manner what the winning bidder has purchased. This rule has not been applied in Auction 35. The FCC auctioned something that it did not have - immediate access to the spectrum for the winning bidders. Thus, if the FCC forces the winning bidders to pay, they will sue the agency for forcing them to pay for something that they did not receive. Alternatively, their shareholders will sue the companies. Meanwhile, wireless carriers have invested in less efficient technologies to meet capacity needs.
The FCC has said that its current policy toward Auction 35 seeks to "protect the integrity" of the spectrum auction process. The opposite is already occurring. The FCC increases uncertainty in the wireless market if it holds carriers accountable for winning bids for licenses that the agency cannot deliver. Bidders will discount their future bids accordingly, and auction revenues will fall. That outcome does not benefit consumers, taxpayers, workers, or shareholders.
JEL Classification: A1,E6,E61,H8,K2,K23,L5,L51,O3,O31,O38
Suggested Citation: Suggested Citation
Cramton, Peter and Crandall, Robert W. and Hahn, Robert W. and Harris, Robert G. and Hausman, Jerry A. and Hazlett, Thomas W. and Lichtman, Douglas and MacAvoy, Paul W. and Milgrom, Paul R. and Sidak, J. Gregory and Schmalensee, Richard and Singer, Hal J. and Smith, Vernon L. and Taylor, William E. and Teece, David, Letter to FCC Chairman Powell Concerning Auction 35 (August 16, 2002). Available at SSRN: https://ssrn.com/abstract=324903 or http://dx.doi.org/10.2139/ssrn.324903