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Long Spectrum Auctions

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Auctions have been used by governments to sell spectrum for years. Successful auctions organized by the US Federal Communications Commission in 1994-1996 popularized this method of spectrum allocation. That was generating huge revenues for the US government and becoming an example for other countries to follow. In Europe, the first attempts to use auctions for spectrum allocation appeared in the late 1990s in Germany and the Netherlands. There was the great success of a series of spectrum auctions for UMTS third-generation mobile telephony systems conducted in 2000-2001 in several European countries. So it is not surprising, that this form of allocation has become popular in most European countries. 

There are different approaches and rules for spectrum auctions. The most popular at the moment being CCA and SMRA. But even two spectrum auctions held under SMRA will differ for a large list of reasons, ranging from the set of lots to specific auction rules approved by regulators. Sometimes auctions can end in a couple of rounds, but it is just the opposite in some cases.

Long spectrum auctions are quite rare and interesting to observe. It’s impossible to give a single reason why a particular auction drags on. But every such case is of interest to our EAS team. In this review, we want to tell about several interesting cases of long auctions. 

Auction in Czech Republic

The first interesting case was the spectrum auctions held in the Czech Republic between 2012 and 2016. The first attempt to auction was in March 2012, the government were distributing 1800 Mhz and 2.6 GHz bands. But the unexpected happened: after 5 months of bidding, the regulator had no choice but to stop the auction, as the bids exceeded $ 1 billion. Such costs would not allow operators to quickly deploy and launch the LTE network, which was the purpose of the auction. The situation was resolved with a series of two other auctions in 2013 and 2015-2016 with modified auction rules.

Auction in Poland

Another long auction took place in Poland. The Polish regulator, the Office of Electronic Communications (UKE) first used spectrum auctions in 2014 to allocate licenses in the 800 MHz and 2.6 GHz bands. For this auction, UKE used the Simultaneous Multi-Round Rising Rate Auction (SMRA) rules, which is really popular worldwide for spectrum allocation. Although the Polish Long Term Evolution (LTE) auction was based on the well-tested SMRA scheme, UKE decided to implement a few special rules that made the process different from SMRA.

One of the major problems encountered during this spectrum auction was that the auction took much longer than expected. Moreover, the regulator lacked the tools to expedite the closing in an orderly fashion. As a result, the regulator applied an unusual rule change by announcing a final round of closed bidding. This led to results contrary to the original auction plan and could lead in part to inefficient spectrum allocation. In total, the process took 9 months and 513 rounds, making it one of the longest recorded auctions in Europe.

Auction in Portugal

And finally, we would like to mention another long auction that is currently underway. The Portuguese auction allocates 58 frequency lots for electronic communications services in the 700 MHz, 900 MHz, 1800 MHz, 2.1 GHz, 2.6 GHz and 3.6 GHz frequency bands. So far, more than 140 days and 1,000 rounds have passed since the auction began. According to the published rounds’ reports, we can assume that a key reason for this length of time is that bidders are raising their bids at low price points — about 1% in most cases — even though the rules allow them to raise bids at much higher amounts.

To try to speed up the process, Anacom has increased the maximum number of bidding rounds per day. Now auction day can have 12 rounds. The original amount of rounds per day was six. Since 81 auction day, Anacom sets seven rounds per day. That was another way for the regulator to speed up the process.

We continue to watch this auction with interest and hope that it concludes successfully for all participants!

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