A Welfare Analysis of Spectrum Allocation Policies

38 Pages Posted: 14 Jun 2006 Last revised: 25 Dec 2013

See all articles by Thomas W. Hazlett

Thomas W. Hazlett

Clemson University

Roberto E. Munoz

Universidad Tecnica Federico Santa Maria

Date Written: January 19, 2008


Economic analysis of spectrum allocation policies focuses on competitive bidding for wireless licenses. Auctions generating high bids, as in Germany and the UK, are identified as successful, while those producing lower receipts, as in Switzerland and the Netherlands, are deemed fiascoes. Yet, even full and costless extraction of license rents does not map directly to social welfare, because spectrum policies creating rents impose social costs. For example, rules favoring monopoly market structure predictably increase license values, but reduce welfare. This paper attempts to shift analytical focus to the relationship between spectrum policy (including license auctions) and efficiency in output markets. In cross-country comparisons of performance metrics in mobile telephone service markets, empirical estimates suggest that countries allocating greater bandwidth to licensed operators and achieving more competitive market structures realize demonstrable social welfare benefits. These gains generally dominate efficiencies associated with license sales. Spectrum policies and rules intended to increase auction receipts (e.g. reserve prices and subsidies for weak bidders), should be evaluated in this light.

Keywords: spectrum allocation, wireless telecommunications policy, auctions, revenue extraction, mobile telephone competition, competition policy, information infrastructure

JEL Classification: D44, D61, L51, L96

Suggested Citation

Hazlett, Thomas W. and Munoz, Roberto E., A Welfare Analysis of Spectrum Allocation Policies (January 19, 2008). George Mason Law & Economics Research Paper No. 06-28, Available at SSRN: https://ssrn.com/abstract=908717 or http://dx.doi.org/10.2139/ssrn.908717

Thomas W. Hazlett (Contact Author)

Clemson University ( email )

Clemson, SC 29634
United States
8646563430 (Phone)
8646564192 (Fax)

HOME PAGE: http://hazlett.people.clemson.edu/

Roberto E. Munoz

Universidad Tecnica Federico Santa Maria ( email )

Avenue Spain 1680
Valparaiso Square 110

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