Collecting revenue from spectrum

The potential for raising revenue through spectrum auctions was highlighted by the Indian government setting revenue-raising as an explicit objective for the award of 3G and BWA spectrum by auction. These auctions took place in 2010 and together raised US$22.7 billion.

While the revenue-raising objective would appear to be in contrast to the efficient allocation of licences, both objectives are equivalent provided that downstream competition is safeguarded. Our report explains how winners of the auction would be encouraged to innovate to fund the price of the licence and ensure profitability, bringing long-term benefits for users. Sufficient revenue generation should come as a by-product of the efficient allocation of licences in a spectrum auction, whilst large deviations from standard auction methodologies in order to raise additional revenues could have unintended consequences that may in fact reduce auction revenues. The slides presenting a summary of the report can be downloaded here.