Carriers Large and Small Oppose AWS Package Bidding Proposal
Small and large wireless carriers want the FCC to drop a proposal to allow both traditional simultaneous multiple round (SMR) bidding and experimental “package” bidding in a June advanced wireless services (AWS) auction. Carriers also said they fret over a proposal to keep critical bidder data secret as the auction progresses. But 2 major carriers expected to be in on the auction -- Verizon Wireless and T-Mobile -- did not agree on whether secrecy would help or hinder bidding. The AWS auction of 1,122 licenses and 90 MHz of spectrum is deemed one of the most significant in many years, especially as carriers roll out spectrum-intensive 3G offerings.
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With SMR bidding, each license would be sold individually in a series of bidding rounds. In package bidding, carriers could bid for both individual licenses and groups of licenses they wish to win in combination. The FCC would award licenses based on a formula designed to maximize auction revenue. In placing a package bid a carrier could win all licenses on which it’s bidding, or none of them.
For the first time, CTIA inveighed against package bids or any changes that would “result in increased complexity” in “one of the most critical auctions in over a decade” for carriers. “CTIA is concerned about the implementation of a combinatorial bidding scheme in such a short time frame,” the group said: “Package bidding may hold promise (for example, enabling bidders to create regional and/or nationwide licenses), but there likely is insufficient time to integrate a combinatorial bidding proposal.”
T-Mobile, expected to be the most aggressive bidder in the AWS auction as it seeks to bolster its spectrum holdings, agreed the AWS auction is no place to experiment. “Potential synergies and other benefits of combinatorial bidding and multiple auctions may exist in the proper context,” T-Mobile said: “The AWS auction, however, is too large, complex and significant for the Commission to introduce any such major innovation or experimentation… Eligibility management between the two auctions and arbitraging between licenses would be extremely challenging, have no real precedent in practice, and could lead to problems during the auction.”
Smaller carriers sided with CTIA and T-Mobile. “The FCC is only beginning its examination of these complicated combinatorial bidding mechanisms, and has yet to provide any assurance such schemes are not overwhelmingly unfavorable to smaller bidders,” the Rural Telecom Group (RTG) said. “Using combinatorial bidding and conducting concurrent simultaneous auctions would increase the complexity of the auction process exponentially and there is no strong reason for adopting so radical a change,” MetroPCS said.
But Verizon Wireless suggested allowing package bidding for 2 groups of large licenses -- blocks E and F -- though not for A-D, which offer licenses likeliest to interest smaller carriers. “Offering both types of auction will satisfy both those bidders interested in smaller groups or single licenses as well as those interested in larger groupings, and will disadvantage neither,” Verizon Wireless said.
Sprint Nextel and Cingular, the other 2 major national carriers, also weighed in against package bidding during the June auction.
Comments were similar on blind bidding, with Verizon Wireless one of the few carriers to express support. Smaller carriers said they see danger in the proposal, as did T-Mobile and Cingular. Neither CTIA nor Sprint commented directly.
“Limiting information about bidders and bidding will lead to a better auction environment in which the focus rightfully is on licenses and their value, not on other bidders and their bidding strategies,” Verizon Wireless said. At the same time, the carrier said, some information still must be released, including a list of the auction applicants, before the auction takes place.
Leap Wireless, among the most active smaller bidders in a 2005 PCS auction, sounded a general note of caution on making changes in the traditional approach to auctions. “Certain proposals here -- such as the possible introduction of package bidding or a proposed massive reduction in the transparency and information available to bidders -- seek to revise the SMR approach in a fashion that is exceedingly unwise for an auction of this scale, scope and importance,” Leap said.
Ken Johnson, an attorney for the RTG, said the language of the FCC’s notice seeking comments on auction rules seems to augur against allowing package bidding. “It seemed like their tentative conclusion was not to do it,” he said. “If you're handicapping the FCC, they're not going to do it.” Johnson said the FCC’s likely decision on blind bidding is less clear. “Most small and mid-size carriers don’t like it,” he said. “We'll be watching the big guys.”
While the FCC seems unlikely to endorse package bidding, blind bidding may get the Commission’s nod, based on the questions it asked in seeking comments on the structure of the auction, a regulatory source said. “It was interesting that the FCC made the combinatorial bidding proposal, but didn’t support it,” the source said. “It was a proposal, but not their favored proposal… Yet they put it out for comment.” Blind bidding, on the other hand, seems to have tentative FCC support, with the FCC mentioning in its notice academic papers endorsing keeping bidders’ names under wraps. Economists’ endorsement may outweigh industry opposition, the source said. “Economic theory and recent analysis suggest that the competitiveness and economic efficiency of an SMR auction may in some circumstances be enhanced if certain information about bids and bidder identities is not revealed publicly prior to and during the auction,” the FCC said.