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Spectrum auctions are used by governments to assign and price licenses for wireless communications. Effective auction design recognizes the importance of competition, not only in the auction but also in the downstream market for wireless communications. This paper examines several instruments that regulators can use to enhance competition and thereby improve market outcomes.

Changes in technologies and in consumer demands have made prior radio spectrum allocations far from efficient. To address this problem the FCC has recently reallocated spectrum for more flexible use in bands that are partially occupied by incumbent license holders. Often, it is necessary for the new license holder to relocate incumbents to make efficient use of the spectrum. Regulations structuring the negotiation between incumbent and new entrant can promote efficiency. In particular, giving the new entrant the right to move the incumbent with compensation can reduce negotiation costs and promote efficiency when there is private information about spectrum values but good public information about the cost of relocating the incumbent. We examine the experience of broadband PCS entrants in relocating microwave incumbents. We conclude with some remarks on how these ideas might be applied to digital television spectrum.JEL No.: C78 (Bargaining), D44 (Auctions), L96 (Telecommunications)

Content diversity, Economic experiments, Localism, Media ownership, News programming, Package bidding, Public affairs programming, Simultaneous multiple-round (SMR) auction, Spectrum auction design, Viewpoint diversity,

The authors describe a market-based two-stage auction that the FCC, with assistance from researchers from universities and consulting firms, developed. The two-sided auction repurposed 84 MHz of spectrum from conventional over-the-air TV to wireless uses and resulted in reducing the U.S. federal deficit by over $7 billion.

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