A Welfare Analysis of Spectrum Allocation Policies
AbstractAnalysis of spectrum allocation policies in the economics literature focuses on competitive bidding for wireless licenses. Auctions generating high bids, as in Germany and the UK, are identified as "successful," while those producing lower receipts, as in Switzerland and the Netherlands, are deemed "fiascoes." Yet, even full and costless extraction of license rents does not map directly to social welfare, because spectrum policies creating rents impose social costs. For example, rules favoring monopoly market structure predictably increase license values, but reduce welfare. This paper attempts to shift analytical focus to the relationship between spectrum policy (including license auctions) and efficiency in output markets. In cross-country comparisons of performance metrics in mobile telephone service markets, empirical estimates suggest that countries that auction licenses do not achieve lower prices or higher levels of output than other nations. Rather, countries allocating greater bandwidth to licensed operators and achieving more competitive market structures realize demonstrable social welfare benefits. These gains generally dominate efficiencies associated with license sales. Policies to increase auction revenues, such as reservation prices and subsidies for weak bidders, should be evaluated in this light.
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Bibliographic InfoPaper provided by Regulation2point0 in its series Working paper with number 348.
Date of creation: Aug 2004
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- Sean Lyons, 2006. "Measuring the Benefits of Mobile Number Portability," Trinity Economics Papers tep2009, Trinity College Dublin, Department of Economics.
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