Thursday, May 14, 2015

Do Spectrum Set Asides Really Work?

It arguably has been quite some time since spectrum auction policies favoring small business or other groups have had any strategic impact.

In fact, over decades, policies favoring small bidders mostly enrich the small bidders, who are able to sell their spectrum at a profit, or create smaller mobile businesses later sold to larger players.

T-Mobile, Sprint and some others argue that spectrum set-asides in the upcoming 600-Mhz spectrum auctions should be created. While that arguably would benefit the carriers able to qualify for spectrum at lower costs, some might question the long term benefit provided by such spectrum set aside policies.

Such policies rather obviously raise costs for winning bidders who are not able to qualify for the set asides. Canada, for example, held a 2008 auction in which 44 percent of the available spectrum was set aside for new entrants.

Some of the same questions were raised about spectrum set asides in Austria.  

While the auction achieved its goal of creating a handful of new firms, none of them has won more than 2.5 percent of the national market, and several have suffered financial distress. T-Mobile US and Sprint might argue they are better positioned to use the spectrum, and that arguably makes sense.

Some might argue that while access to new spectrum, especially in bands offering propagation advantages, helps both T-Mobile US and Sprint, which have relatively little spectrum of that sort, compared to AT&T and Verizon.

New spectrum might help T-Mobile US more than Sprint, which actually owns lots of spectrum, if not so much in the sub-1 GHZ range.

But some will continue to ask whether such set aside policies actually work, in the sense of promoting long term and sustainable competition in mobile markets.

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