The published research can be found in the following papers:

• G. Madden and T. Tran, 2013, ‘Do Regulators Consider Welfare when Assigning Spectrum via Comparative Selections?’, Applied Economics Letters 20(9), 852–856
• G. Madden and H. Ahmad, 2013, ‘3G Spectrum Auction Aftermarket Network Deployment’, Applied Economics Letters 20(3), 300–303
• G. Madden and A. Morey, 2013, ‘Regulator Flexibility and the Administrative Allocation Licencing of 3G Spectrum’, Applied Economics 45(13), 1713–1718
• G. Madden, E. Bohlin and A. Morey, 2012, ‘Entry into 3G Mobile Telecommunications Markets’, International Journal of Management and Network Economics 2(4), 374–391

For more information about DotEcon’s Spectrum Awards Database, click here.

This follows the EE and Vodafone challenge in March 2012 of the Competition Commission’s (CC) determination on the appeals brought by the mobile operators on Ofcom’s 2011 decision to regulate MTRs based on a pure LRIC cost standard.  The CC’s determination on 14 February 2012 found that, amongst other things, Ofcom did not err in adopting a pure LRIC cost standard for the setting of wholesale MTRs.  EE and Vodafone claimed that the CC’s determination should be set-aside on judicial review principles.  On 3 May 2012 the CAT rejected EE and Vodafone’s challenges and upheld the CC’s conclusion (for more information see our news item).

EE appealed the CAT’s rejection of its and Vodafone’s appeals to the CoA.  EE claimed that it had found a judicially reviewable error in the CC’s determination that arose from the CC’s recognition that it did not have reliable evidence on likely customer responses to price increases that would result from a move to a pure LRIC standard.  According to EE, the CC was in no position to make a choice between pure LRIC and LRIC plus without this key information and thus should have referred the matter back to Ofcom to obtain the necessary evidence.

Whilst the CoA accepted the premise on which EE’s main ground of appeal was based, it considered that the real question in this appeal was whether the CC felt it had lacked key evidence that was determinative to the choice between pure LRIC and LRIC plus.  The CoA concluded that the CC did not regard the evidence presented as insufficient to make a choice.  Indeed, the CC was able to reach a conclusion.  In the CoA’s view, the CC had demonstrated that although customer responses to price increases was a key issue, it was by no means determinative to the question of allocative efficiency and thus was not determinative to the choice between LRIC and LRIC plus.

DotEcon has provided expert economic advice and testimony in support of BT, as part of its intervention in support of Ofcom’s decision to adopt a pure LRIC cost standard.

• Everything Everywhere was allocated 796 to 801 MHz paired with 837 to 842 MHz in the 800 MHz band and 2535 to 2570 MHz paired with 2655 to 2690 MHz in the 2.6 GHz band without making an additional payment for this allocation.
• Hutchison 3G was allocated 791 to 796 MHz paired with 832 to 837 MHz in the 800 MHz band without making an additional payment for this allocation.
• Niche Spectrum Ventures was allocated 2520 to 2535 MHz paired with 2640 to 26555 MHz  as well as 2595 to 2620 MHz in the 2.6GHz band paying an additional £15,061,179 for their allocation.
• Telefonica O2 was allocated 811 to 821 MHz paired with 852 to 862 MHz in the 800 MHz band without making an additional payment for this allocation.
• Vodafone was allocated 801 to 811 MHz paired with 842 to 852 MHz in the 800 MHz band and 2500 to 2520 MHz paired with 2620 to 2640 MHz and 2570 to 2595 MHz in the 2.6GHz band for an additional payment of £12,099,143.

This successfully concludes the UK 4G auction.

DotEcon worked on various aspects of the award process over the course of several years. DotEcon advised Ofcom on the design and implementation of the auction, which was run using DotEcon’s WebBidder auction platform. For further information on the auction outcome see Ofcom’s press release.

Spectrum allocation and base prices payable by the winners:

• Everything Everywhere won 2x5MHz of 800MHz and 2x35MHz of 2.6GHz for £589m.
• Hutchison 3G won 2x5MHz of 800 MHz for £225m.
• Telefonica O2 won 2x10MHz of 800 MHz with coverage obligations for £550m.
• Vodafone won 2x10MHz of 800 MHz, 2x20MHz of 2.6 GHz and 25MHz of unpaired 2.6GHz for £791m.
• Niche Spectrum Venture won 2x15MHz of 2.6GHz and 20MHz of unpaired 2.6GHz for £186m.

All winners will compete in another round of bidding shortly to determine the location of their assignments within the two spectrum bands. The revenue from this so-called assignment round is expected to be small compared to the overall revenue.

While the auction revenue of £2.3bn stayed below some analysts’ estimates, the auction is considered a full success by the five winners as well as by Ofcom. All winners announced that they are “extremely pleased” with the result of the auction, which they consider “great news” and “a landmark moment” for UK consumers. The operators and Ofcom agree that the spectrum assignment enables roll-out of “super-fast” 4G services which, according to Ofcom’s estimates, will generate consumer benefits of more than £20bn over the next ten years. Furthermore, the auction outcome meets Ofcom’s objectives of at least four credible national wholesalers of 4G services and of widespread 4G coverage to at least 98% of the UK population.

The UK 4G auction used a novel variant of the CCA auction format, which was developed by DotEcon for Ofcom. The lot structure of this multi-band auction included fungible lots in the 2.6GHz band and an abstract lot with attached coverage obligations in the 800MHz band. The auction rules employed spectrum caps to safeguard against extremely asymmetric spectrum assignments, and special spectrum portfolios, which reserved spectrum for eligible bidders to enable credible competition in the downstream market. The bidder-specific prices were determined via an opportunity-cost based second price rule.

DotEcon worked on various aspects of the award process over the course of several years. DotEcon advised Ofcom on the design and implementation of the auction, which was run using DotEcon’s WebBidder auction platform. For further information on the auction outcome see Ofcom’s press release.

Licences were offered in the 800MHz, 900MHz, 1800MHz, 1900MHz, 2100MHz and 2600MHz bands.  The auction followed a Combinatorial Clock Auction (CCA) format with a relative cap activity rule. All available licences were sold. Tele2 won 2x10MHz of 800MHz spectrum reserved for a newcomer at a price of €161m. Three other bidders, KPN, Vodafone, and T-Mobile, also won new spectrum rights, with KPN paying €1.35bn, Vodafone €1.38bn, and T-Mobile €911m. A fifth bidder, a joint venture between UPC and Ziggo, did not win any spectrum.  More information about the Dutch multiband auction can be found on the Agentschap Telecom website.

The ECB study provides a valuable attempt at collecting data on the usage and costs of different payment systems in thirteen EU member states. However, its result need to be interpreted with caution. The study clearly show that it is impossible to put a simple figure on what it costs to make a payment. It shows that scale economies are key, and suggests that substantial cost savings could be achieved by moving from cash payments to cashless payments.

The full review of the study is available here.

Digital Dividend, the Danish way
The Danish Digital Dividend auction is a shining example of how auctions can be used for allocating coverage obligations – in this case alongside radio spectrum. Arisa Siong explains this unique design and its results in more detail.

After the Big Bang
The Swiss multi-band auction, completed earlier this year, has attracted attention not just because it included the greatest number of bands to date, but also because it has produced prices that might at first sight look difficult to explain. However, as Christian Koboldt explains, the results only show how the format works to achieve efficiency.

Big but not beautiful …
Modern combinatorial auctions support very flexible spectrum packaging in the interest of promoting efficiency. But is there a limit on how complex lot structures can become without jeopardising the effectiveness of the process? Hans Ihle and Dan Maldoom explore this question.

Competition and regulatory digest
Tasneem Azad provides a brief overview of recent developments in these areas.

DotEcon advised ComReg throughout the process and the auction was run on DotEcon’s WebBidder auction platform.  More information about the Irish multiband auction can be found in ComReg’s Information Notice.

The auction followed a “Combinatorial Clock Auction” (CCA) format similar to that proposed by Ofcom for the upcoming 4G auction in the UK and used in number of recent spectrum auctions including the Danish 800MHz auction. The Irish auction included a number of novel features, such as the use of two time slices – requiring innovative activity rules – and party-specific lots giving bidders the option to liberalise existing spectrum holdings.

In its June 2012 Consultation Ofcom consulted on:

1. its identification of a number of relevant wholesale and retail markets in specific geographic areas of the UK;
2. its determinations in respect of the designation of SMP on BT and KCOM; and
3. its proposals on remedies to be imposed on the operators (in the form of services conditions and directions set out in the draft leased lines charge control document of July 2012).

Ofcom now proposes to impose cost accounting obligations on BT and accounting separation obligations on both operators in each of the relevant wholesale product markets in which Ofcom has proposed that they have SMP.

DotEcon is providing expert economic advice and support to a telecommunications provider in its responses to the Ofcom BCMR and leased lines charge control consultations.