How Incumbents Blocked New Entrants In The AWS-1 Auction: Lessons for the Future
Posted: Friday April 20, 2007
Dr. Gregory Rose
Abstract
This study examines a concerted effort by major incumbents in the FCC’s AWS-spectrum auction to target those new entrants whose entry harbingered significant potential competitive broadband threat if (1) they acquired national AWS footprint in the AWS-1 auction or (2) they acquired a strong regional or multi-regional base from which they could acquire national footprint in future auctions.
Targeted new entrants were met with a tacitly-collusive strategy of blocking bidding, coalitions of multiple major incumbents which bid for the purpose of denying licenses to the new entrant rather than acquiring the licenses for themselves. A majority of the major incumbents ceased bidding on such licenses after the targeted new entrant ceased bidding. All but two targeted new entrants were denied any spectrum in the AWS-1 auction. There is evidence in the pattern of bids that the major incumbents’ blocking bidding strategy may have been explicitly collusive and the incumbents were willing to pay a significant premium to block the targeted new entrants, indicated by the significantly higher mean price they paid for the spectrum they acquired than other bidders.
The study concludes with a recommendation that effective anonymous bidding rules be adopted for the 700 MHz and other future FCC spectrum auctions, since only such rules could prevent use of this anti-competitive strategy by incumbents.
Read the study