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Incentive Auctions for Repurposing Broadcasting Spectrum. Evan Kwerel Federal Communications Commission Spectrum Markets: Challenges Ahead Kellogg School of Management Northwestern University June 2-3, 2011. Problem.

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incentive auctions for repurposing broadcasting spectrum

Incentive Auctions for Repurposing Broadcasting Spectrum

Evan Kwerel

Federal Communications Commission

Spectrum Markets: Challenges Ahead

Kellogg School of Management

Northwestern University

June 2-3, 2011

problem
Problem
  • Develop a voluntary market mechanism to efficiently repurpose broadcast spectrum
repurposing broadcast spectrum two auction designs
Repurposing Broadcast Spectrum: Two Auction Designs
  • Sequential auctions
    • Incentive auction – binding offers to sell spectrum (supply curve)
    • “Forward” auction – binding bids to buy spectrum (demand curve)
    • Determine amount of spectrum cleared (supply = demand)
    • Repack broadcasters and consummate winning offers
  • Double auction (Exchange)
    • Conduct first three steps above simultaneously
    • Repack broadcasters and consummate winning offers
  • Approaches essentially equivalent
    • Amount of spectrum cleared, winning sellers and buyers determined using full information about both supply and demand
    • But sequential approach is easier to implement
incentive auction to clear spectrum
Incentive auction to clear spectrum
  • Incumbents make voluntary binding offers to release spectrum
    • Share a channel in same market through multicasting with other broadcasters, while retaining must-carry rights for primary program stream
    • Discontinue OTA broadcasting
    • Move to upper VHF or lower VHF band
  • Find the least costly way to clear various amounts of contiguous spectrum in each market based on the price offers from incumbents (create supply curves)
    • FCC can involuntarily repack TV channels within each band to clear contiguous blocks
forward auction for cleared spectrum
“Forward” auction for cleared spectrum
  • Determine alternative band plans (depending on amount of spectrum made available) for new flexible uses, e.g., mobile broadband
  • Participants make binding bids to buy spectrum licenses (create demand curves)
determine amount of spectrum cleared
Determine amount of spectrum cleared

Broadcaster

Supply

Price

Wireless

Demand

Spectrum

a market where target achieved when clearing cost less than auction revenue
A Market Where Target Achieved When Clearing Cost Less Than Auction Revenue

Broadcaster

Supply

Price

Government Revenue

Wireless

Demand

Spectrum

Target

consummate winning offers and repack broadcasters
Consummate winning offers and repack broadcasters
  • Collect payments from winners of forward auction and assign licenses
  • Make payments to winners of incentive auction
  • Reassign channels to broadcasters remaining on the air and compensate for moving cost
  • Deposit remaining auction revenue in Treasury
alternative double auction exchange to simultaneously clear and license
Alternative – Double Auction (Exchange) to Simultaneously Clear and License
  • FCC conducts an exchange in which broadcasters offer spectrum (by channel sharing, discontinuing OTA broadcasting or moving to VHF) and mobile operators bid on new unencumbered licenses simultaneously.
  • Exchange simultaneously determines winning sellers, winning buyers and the amount of spectrum cleared.
thank you

Thank You

For further information

evan.kwerel@fcc.gov