New Zealand Spectrum Policy: A Model for the United States?

In 1989, the New Zealand government began to auction "management rights" to the electromagnetic spectrum, using sealed-bid, second-price ("Vickrey") auctions. Subsequently, the United States began to auction spectrum through ascending-bid, multiple-round auctions. Although students of auction processes find the latter type of auction to be the more efficient form, I find that the prices realized in the New Zealand cellular auctions are very similar to those realized in the U.S. Personal Communications Services auctions after adjusting for differences in demographics. The flexibility of the New Zealand management rights should theoretically allow the winning bidders to find the highest-valued use for the spectrum, but many of the auctioned rights remain unused several years later. A country as small as New Zealand simply cannot be as innovative in finding new uses for the spectrum because of the large initial costs of developing the requisite equipment for using it. There is no single issue more important to the competitive rollout of services than microwave relocation. Copyright 1998 by the University of Chicago.