Selling Spectrum Rights

Essay by janjanice88University, Bachelor'sA-, February 2005

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The article, "Selling Spectrum Rights", John Macmillan stated that the government had many aims which complicated auction design, including the prevention of monopolization, promotion of more minority firms in the game, achieving efficiency, as well as generating revenues for government. Although for example, Europe governments made a lot of money on the 3G licenses and allowed countries that were formally out of the loop to become part of modern society, the Europe telecoms used it inefficiency. They paid high price (over euro100 billion) in 3G technology have resulted in auctions fairing poorly. No body can use it, and the regulation is so inflexible. They paid so much money for nothing. This tells us that paying higher price on something does not mean the return price is high. The FCC was given authority to auction spectrum rights in an effort to prevent monopolization of the system, as mentioned above. On welfare improvement for example, the FCC has the ability to modify and select the rules by which they will auction material, ensuring in their minds that smaller firms and minority groups have the same opportunities to bid on spectrum rights as other corporations.

Administrative decisions used to be the common used method for deciding who received the right. However, because this method is slow and lack of transparency in the bidding process. For example, the FCC may decide to favor a minority firm with less revenue by allowing them to make payment installments on certain items. Administrative decisions were replaced by other efficient methods later on. The reading states that efficiencies will be realized if bidders succeed in aggregating some of the licenses. The government had a limited number of spectrum licenses available, that have to be spread over a large geographical area with many different wavelengths. Aggregation efficiencies allow firms...