SMRA vs CCA: the two main spectrum auction formats
SMRA stands for Simultaneous Multiple Round Auction. CCA stands for Combinatorial Clock Auction. Both exist to solve the same problem: spectrum cannot sensibly be sold one block at a time. Here is how each works, and how to tell which one an award needs.
Why spectrum is not sold one block at a time
For decades, auctions have been the preferred way to assign spectrum licences. Done well, they are fair, transparent and efficient. Done badly, they misallocate a national resource for twenty years.
The risks are well known. Collusion and speculation distort prices. Competition can push a winner into overpaying — the winner’s curse — which then gets passed to customers or absorbed as a loss. And bidders can end up missing the very bands they needed, a problem called aggregation risk. In the worst case, the best-placed operator is locked out of the market altogether.
The 2020 Nobel Prize in economics went to Paul Milgrom and Robert Wilson for studying exactly this. Their finding: traditional auctions, where items sell one after another, do not work for spectrum. Operators need contiguous spectrum within a band and, in a multi-band award, complementary bands to build an efficient network. Sell sequentially and an operator can acquire 90% of what it needs, lose a few critical blocks at the end, and find the rest devalued. Meanwhile competitors who can see what a rival needs simply bid the price up.
SMRA — Simultaneous Multiple Round Auction
Milgrom and Wilson’s answer was to sell everything at once. In an SMRA, all blocks are auctioned simultaneously and participants bid on one or more blocks in each round. If a first-choice band gets too expensive, a bidder can redirect to another while the auction is still running — which is precisely what a sequential auction denies them.
SMRAs also carry an activity rule: bid actively in the early rounds or lose the right to bid later. That discourages speculation and makes it hard to sit back and sabotage a competitor at the end.
SMRA has been adopted worldwide, but it is not right for every context. Even with simultaneous bidding, a participant can still end up locked out of a specific band it needed.
CCA — Combinatorial Clock Auction
That gap led Milgrom and others to the Combinatorial Clock Auction. A CCA is more complex to run, but in theory produces a more efficient allocation.
Bidders in a CCA do not bid on specific blocks. The auctioneer groups blocks into categories of equal value — say five low-frequency blocks as Category A, seven mid-frequency as Category B, three high-frequency as Category C. Bidding then runs through three phases.
1. The clock phase
Like any round-based auction, but instead of naming blocks, participants say how many blocks they want from each category at the current price. After each round the auctioneer compares total demand against supply: where demand exceeds supply the price rises next round, otherwise it holds. This continues until demand for every category is at or below supply.
The central advantage: a bidder gets all the blocks in its package or none of them. There is no route to ending up with a combination nobody wanted.
Eligibility points
To stop bidders cycling endlessly through combinations, participants pay a deposit before the auction in exchange for eligibility points. More deposit, more points, more blocks biddable per round. Points are use-it-or-lose-it and never increase, so a bidder who sits out early rounds is quickly sidelined, and as bidding continues everyone is forced to concentrate on what they most want. That is what drives the auction toward a balance of supply and demand. Eligibility points are not unique to CCA — SMRA uses them too.
2. The supplementary phase
By the end of the clock phase everyone has a clear read on demand for each category. Participants now submit additional sealed bids: more for a package they already bid on, or new combinations. Rules constrain how far these can depart from clock-phase behaviour, so nobody can bid one way in public and a completely different way in secret.
Winner determination and the second-price rule
An algorithm evaluates every clock-phase and supplementary bid, accounting for the reserve-price value of any unsold blocks. The winning combination is the one with the highest total bid value. Winners then pay under the second-price rule — the amount of the second-highest bid, not their own.
3. The assignment phase
With the quantities settled, the regulator presents winners with the possible arrangements of actual frequencies and they bid on their preferred one. The allocation with the highest total wins.
So which format is better?
It depends, and the answer turns on one question: how much aggregation risk is there?
If bidders have a strong interest in particular complementary combinations, or there is real risk they cannot win the key blocks they need, a CCA is worth considering. If neither is true, the added complexity buys you nothing — a simpler format will be easier to run, easier for bidders to understand, and cheaper to deliver.
A note from running both
Complexity has a cost that does not appear in the design documents: bidder training, mock auctions, and the number of ways a rule can be misread on the day. We have delivered SMRA, modified SMRA, CCA, SMRA–clock hybrids, and formats written from scratch to a ministry’s own rules. The best format is the simplest one that handles your actual aggregation risk.
Getting the decision right
Selecting the format is an important decision, and executing it properly matters just as much. Regulators do not have to work this out alone: we provide software, consulting and hands-on support for spectrum auctions, and have helped run successful awards in a number of countries.