IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v46y2014i17p1953-1960.html
   My bibliography  Save this article

The determinants of prices in the FCC's 700 MHz spectrum auction

Author

Listed:
  • Gary Madden
  • Erik Bohlin
  • Paitoon Kraipornsak
  • Thien Tran

Abstract

This article examines the prices paid for 700 MHz licenses in recent Federal Communications Commission auctions. Econometric modelling confirms the presence of economies of scale and scope in wireless spectrum valuations. That is, higher prices are recorded for areas with large populations, whilst lower prices are realized for geographically large areas. Also, smaller geographic license areas appear to meet bidders' demand more effectively, and licenses in areas with high incomes are sold at higher prices. Not surprisingly, more strict deployment requirements and the presence of harmful technical interference reduce prices. Also, paired spectrum receives higher prices than unpaired spectrum. Interestingly, high minimum opening bids and upfront deposits are associated with higher prices. Finally, competitive bidding places upward pressure on prices.

Suggested Citation

  • Gary Madden & Erik Bohlin & Paitoon Kraipornsak & Thien Tran, 2014. "The determinants of prices in the FCC's 700 MHz spectrum auction," Applied Economics, Taylor & Francis Journals, vol. 46(17), pages 1953-1960, June.
    • Handle: RePEc:taf:applec:v:46:y:2014:i:17:p:1953-1960
    DOI: 10.1080/00036846.2014.889807
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/00036846.2014.889807
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/00036846.2014.889807?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Bazelon, Coleman, 2009. "Too many goals: Problems with the 700Â MHz auction," Information Economics and Policy, Elsevier, vol. 21(2), pages 115-127, June.
    2. Peter Cramton, 2013. "Spectrum Auction Design," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 42(2), pages 161-190, March.
    3. Brannman, Lance & Klein, J Douglass & Weiss, Leonard W, 1987. "The Price Effects of Increased Competition in Auction Markets," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 24-32, February.
    4. Faulhaber, Gerald R., 2006. "The future of wireless telecommunications: Spectrum as a critical resource," Information Economics and Policy, Elsevier, vol. 18(3), pages 256-271, September.
    5. Gruber, Harald, 2001. "Spectrum limits and competition in mobile markets: the role of licence fees," Telecommunications Policy, Elsevier, vol. 25(1-2), pages 59-70, February.
    6. Jeremy Bulow & Jonathan Levin & Paul Milgrom, 2009. "Winning Play in Spectrum Auctions," NBER Working Papers 14765, National Bureau of Economic Research, Inc.
    7. Peter Cramton & Evan Kwerel & Gregory Rosston & Andrzej Skrzypacz, 2011. "Using Spectrum Auctions to Enhance Competition in Wireless Services," Journal of Law and Economics, University of Chicago Press, vol. 54(S4), pages 167-188.
    8. Gary Madden & Ismail Saglam & Aaron Morey, 2010. "Auction Design and the Success of National 3G Spectrum Auctions," Working Papers 1002, TOBB University of Economics and Technology, Department of Economics.
    9. Lawrence M. Ausubel & Peter Cramton & R. Preston McAfee & John McMillan, 1997. "Synergies in Wireless Telephony: Evidence from the Broadband PCS Auctions," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(3), pages 497-527, September.
    10. Gary Madden & Erik Bohlin & Thien Tran & Aaron Morey, 2014. "Spectrum Licensing, Policy Instruments and Market Entry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(3), pages 277-298, May.
    11. J.G. Sidak & H.J. Singer, 2002. "How can regulators set nonarbitrary interim rates? The case of local loop unbundling in Ireland," Competition and Regulation in Network Industries, Intersentia, vol. 3(3), pages 273-296, September.
    12. Harald Gruber, 2002. "Endogenous Sunk Costs in the Market for Mobile Telecommunications - The Role of Licence Fees," The Economic and Social Review, Economic and Social Studies, vol. 33(1), pages 55-64.
    13. Thomas W. Hazlett, 2008. "Property Rights and Wireless License Values," Journal of Law and Economics, University of Chicago Press, vol. 51(3), pages 563-598, August.
    14. Brusco, Sandro & Lopomo, Giuseppe & Marx, Leslie M., 2009. "The [`]Google effect' in the FCC's 700Â MHz auction," Information Economics and Policy, Elsevier, vol. 21(2), pages 101-114, June.
    15. Severin Borenstein, 1988. "On the Efficiency of Competitive Markets for Operating Licenses," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(2), pages 357-385.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sridhar, V. & Prasad, Rohit, 2021. "Analysis of spectrum pricing for commercial mobile services: A cross country study," Telecommunications Policy, Elsevier, vol. 45(9).
    2. Massaro, Maria & Beltrán, Fernando, 2020. "Will 5G lead to more spectrum sharing? Discussing recent developments of the LSA and the CBRS spectrum sharing frameworks," Telecommunications Policy, Elsevier, vol. 44(7).
    3. Beltrán, Fernando & Massaro, Maria, 2018. "Spectrum management for 5G: assignment methods for spectrum sharing," 29th European Regional ITS Conference, Trento 2018 184932, International Telecommunications Society (ITS).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gary Madden & Hiroaki Suenaga, 2017. "The determinants of price in 3G spectrum auctions," Applied Economics, Taylor & Francis Journals, vol. 49(32), pages 3129-3140, July.
    2. Sridhar, V. & Prasad, Rohit, 2021. "Analysis of spectrum pricing for commercial mobile services: A cross country study," Telecommunications Policy, Elsevier, vol. 45(9).
    3. Thomas W. Hazlett & David Porter & Vernon Smith, 2011. "Radio Spectrum and the Disruptive Clarity of Ronald Coase," Journal of Law and Economics, University of Chicago Press, vol. 54(S4), pages 125-165.
    4. Peter Cramton, 2013. "Spectrum Auction Design," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 42(2), pages 161-190, March.
    5. Peter Cramton & Evan Kwerel & Gregory Rosston & Andrzej Skrzypacz, 2011. "Using Spectrum Auctions to Enhance Competition in Wireless Services," Journal of Law and Economics, University of Chicago Press, vol. 54(S4), pages 167-188.
    6. Erik Bohlin & Gary Madden & Aaron Morey, 2010. "An Econometric Analysis of 3G Auction Spectrum Valuations," RSCAS Working Papers 2010/55, European University Institute.
    7. Ignacio Palacios-Huerta & David C. Parkes & Richard Steinberg, 2024. "Combinatorial Auctions in Practice," Journal of Economic Literature, American Economic Association, vol. 62(2), pages 517-553, June.
    8. Mochon, Asuncion & Saez, Yago, 2017. "A review of radio spectrum combinatorial clock auctions," Telecommunications Policy, Elsevier, vol. 41(5), pages 303-324.
    9. Kasberger, Bernhard, 2023. "When can auctions maximize post-auction welfare?," International Journal of Industrial Organization, Elsevier, vol. 89(C).
    10. Michelle Connolly & Nelson Sa & Azeem Zaman & Chris Roark & Akshaya Trivedi, 2018. "The Evolution of U.S. Spectrum Values Over Time," Working Papers 121, Brandeis University, Department of Economics and International Business School.
    11. Beltrán, Fernando & Massaro, Maria, 2018. "Spectrum management for 5G: assignment methods for spectrum sharing," 29th European Regional ITS Conference, Trento 2018 184932, International Telecommunications Society (ITS).
    12. Rosa, Benjamin V., 2022. "Bid credits in simultaneous ascending auctions," Games and Economic Behavior, Elsevier, vol. 132(C), pages 189-203.
    13. Cambini, Carlo & Garelli, Nicola, 2017. "Spectrum fees and market performance: A quantitative analysis," Telecommunications Policy, Elsevier, vol. 41(5), pages 355-366.
    14. Mo Xiao & Zhe Yuan, 2022. "License Complementarity and Package Bidding: US Spectrum Auctions," American Economic Journal: Microeconomics, American Economic Association, vol. 14(4), pages 420-464, November.
    15. Cave, Martin & Nicholls, Rob, 2017. "The use of spectrum auctions to attain multiple objectives: Policy implications," Telecommunications Policy, Elsevier, vol. 41(5), pages 367-378.
    16. Committee, Nobel Prize, 2020. "Improvements to auction theory and inventions of new auction formats," Nobel Prize in Economics documents 2020-2, Nobel Prize Committee.
    17. Cherbonnier, Frédéric & Salant, David & Van Der Straeten, Karine, 2021. "Getting auctions for transportation capacity to roll," TSE Working Papers 21-1254, Toulouse School of Economics (TSE).
    18. Choi, Yong-Jae, 2022. "Spectrum auctions in a thin market: The Korean case," Telecommunications Policy, Elsevier, vol. 46(8).
    19. Vogelsang Ingo, 2013. "The Endgame of Telecommunications Policy? A Survey," Review of Economics, De Gruyter, vol. 64(3), pages 193-270, December.
    20. Daglish, Toby & Sağlam, Yiğit & Ho, Phuong, 2017. "Auctioning the Digital Dividend: A model for spectrum auctions," International Journal of Industrial Organization, Elsevier, vol. 53(C), pages 63-98.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:46:y:2014:i:17:p:1953-1960. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEC20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.