[address-policy-wg] Spectrum and IP address reservations

I forward information about a study conducted by NERA on spectrum auctions.
Not directly applicable to IP addresses, but has some relevance to current discussions about attempts to reserve resources for new entrants vs. incumbents. Bear in mind, of course, that the study was produced by Telus, an incumbent operator, and discount for that; the point is that we need to pay attention to the economic reasoning underlying the finding; which is that policies designed to "help" competitors can have unintended consequences that may encourage conslidation and higher prices.

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Dear ITS Colleague,

As you know, Industry Canada completed Canada’s advanced wireless services (AWS) spectrum auction in July 2008. A recent study that NERA conducted for the Canadian telecommunications company TELUS analyzed the auction, and found that it may have been distorted by the insertion of incompatible regulatory goals into the auction process.

NERA’s analysis showed that while the auction generated higher revenues than expected, the most important reason for this was due to arbitrage opportunities in the auction design generated by the regulator’s decision to set-aside 44 percent of the available spectrum for “entrants” which, as defined, were as all qualified bidders except the three largest incumbent mobile operators. As evidenced in the UK 3G and other 3G auctions in the early 2000s, the resulting inflated spectrum prices can negatively affect competition as investors tend to sell their holdings when earnings decrease and/or debt ratings drop. In severe cases, it can lead to market exit or market consolidation, all of which has a direct effect on competition.

Our report urges regulators to carefully balance the costs and benefits of regulatory intervention, and includes suggestions for avoiding the problems in future auctions that we identified in the Canadian case. The report is available for free upon request at: www.nera.com<http://www.nera.com> . [snip]

_______________________________

Christian Dippon
Vice President

NERA
   Economic Consulting

One Front Street, Suite 2600

San Francisco, CA 94111
Tel: 1-415-291-1044, Fax: 1-415-291-1020
Mobile: 415-810-9246

Christian.Dippon at NERA.com
www.nera.com
www.telecomeconomics.com
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