05.07.2013 07:55 AM
Study finds limiting incentive auction participation threatens success
Television broadcasters looking to relinquish some or all of their spectrum in the upcoming FCC incentive auction should hope the agency chooses not to restrict the participation of qualified bidders, otherwise there may not be adequate funds to pay for the spectrum they’re making available.
That’s one of the conclusions of a new study from the Center for Business and Public Policy at Georgetown University’s McDonough School of Business. The study, "The Economic Implications of Restricting Spectrum Purchases in the Incentive Auctions," by economists Robert Shapiro, Douglas Holtz-Eakin, and Coleman Bazelon presents an analysis of how auction bidding restrictions would cut auction revenues.
Another important conclusion for the nation at large is that banning or limiting bidder participation threatens fully funding the FirstNet high-speed public safety broadband network mandated by Congress in 2012.
Limiting the participation of Verizon Wireless and AT&T from the auction could cut auction revenue from $31 billion to about $19 billion, a nearly 40 percent decrease, the study finds. It warns that lowering revenue would likely reduce the amount of spectrum that could be recouped from TV broadcasters for use by wireless broadband services.
Generating only $19 billion in auction proceeds would create unwanted financial ripples and threaten the overall success of the auction. The authors estimate the Congressionally mandated high-speed public safety broadband network FirstNet, will require $7 billion from auction proceeds. With repacking costs estimated at $2 billion, only $10 billion would remain to compensate broadcasters for giving up spectrum, the report says.
The analysis shows that by permitting all four national wireless carriers to participate without restrictions more auction revenue would be generated and as much as $22 billion would be made available to compensate broadcasters for their spectrum.
“We are hopeful that the FCC will indeed incorporate the information provided in the study we are releasing today as the Commission works to fashion the design of the auction," said John Mayo, a professor of economics, business, and public policy at Georgetown McDonough and executive director of the Georgetown Center for Business and Public Policy.
"In particular, the analysis included in the study points to a number of costs associated with limiting participation in the auction. These empirical findings should give pause to any headlong move to handicap some firms' participation in the auction."