AbstractsBusiness Management & Administration

Economists have for a long time taken a keen interest in governments assignment of licenses to use the radio frequency spectrum. Traditionally, governments have managed the radio spectrum in a way that has been compared to the regime of GOSPLAN, the famous central planning office of the former Soviet Union (Hazlett, 2003). Economists since Ronald Coase (1959) have argued that allocating a scarce resource by administrative fiat makes little sense. Establishing a market for spectrum, in which owners could buy, sell, subdivide and aggregate units of spectrum would lead to a much more efficient allocation of it. The use of auctions for assigning usage rights to spectrum have been heralded as one of the major achievements of the economical science, and the challenge of developing auction formats for spectrum auctions has been among the major driving forces behind the surge in research related to auctions in the last two decades. In parallel with the introduction of auctions, telecommunication markets have been liberalised. This process of liberalisation has exerted an increasing amount of pressure upon spectrum managers to modernize their practices and to implement a more market based approach to radio spectrum management. The challenge is to assign spectrum in a way that maximizes the value of its use, a problem which ranges far wider than merely picking the auction format among those described in economic theory that is most likely to yield a favourable result. Designing an auction procedure entails making decisions about what to sell, to whom, when, and how; these decisions are, as explained by Milgrom (2004), not independent ones. Among the problems facing the spectrum manager are identifying the appropriate regime of property rights, dividing the spectrum into suitable units for sale, and specifying any additional restrictions on its use and on the set of eligible buyers. The processes of defining the property rights and of dividing it into units are particularly closely interrelated with the choice of auction design. For example, by deciding whether the spectrum should be sold as a single large unit or as a number of smaller units, the spectrum manager determines the range of possible auction formats. The design of the usage right can create complementarities between the lots in the auction, affecting how different formats could be expected to perform. Economical efficiency is often stated as the main objective of spectrum management, although other objectives are frequently formulated by the government as well. The range of policies open to the spectrum manager may be constrained both by national and international law. The spectrum manager is responsible for a resource which is used in several sectors of the economy, and it can be challenging to evaluate how spectrum management policies are best implemented to interact with the other instruments used by the government in pursuance of its objectives in those sectors. The question of whether spectrum management should be used as a tool to affect the market…