Bidder Identity Likely Secret in AWS Auction

“Even though this kind of landed with a thud, it looks like the bureau is leaning toward nondisclosure,” a regulatory attorney said: “This was opposed by most industry groups but got the support of economists. It’s being pushed by the Chief Economist [Leslie Marx].” Since 1994, the FCC traditionally has identified the highest bidder for each spectrum license as auction rounds progress. Under the rule change, the Wireless Bureau would indicate the number of bids for each license and the leading bid, but not name that bidder.

In reply comments, FTC economists endorsed keeping bidder identity secret, but admitted that opinion doesn’t necessarily reflect all views at the FTC. “Our experience in competition issues and our understanding of the relevant economics literature leads us to believe that the balance of evidence supports the Federal Communications Commission’s proposed rule changes with respect to information disclosure,” the bureau said. “The possibility of bidders using collusive strategies in… auctions is well established in the theoretical economics literature.”

The bureau acknowledged the Commission has moved to limit signaling, though, it said, bidders still can send signals by bidding significantly higher amounts than the previous high bid -- a practice known as jump bidding. “This practice can be a way to signal a threat of a bidding war, and empirical evidence suggests this practice was observed in previous FCC spectrum auctions,” the bureau said.

But in other reply comments, wireless carriers large and small continued to rail against secrecy. Notable exception: Verizon Wireless, which urges limited blind bidding. “Blind bidding would limit the ability of small, rural carriers to make informed bidding decisions based on the technology utilized by neighboring carriers, and thus would hinder their participation in the… auction,” said the Organization for the Promotion & Advancement of Small Telecom Companies. T- Mobile said “transparent auctions will ensure that bidders with known spectrum needs, such as T-Mobile, are not disadvantaged by disparity of information on market interest.”

Private equity firms Madison Dearborn Partners and TA Associates warned blind bidding could hurt auction proceeds. “Information concerning the number and identity of different competitors in a market, their respective spectrum holdings, their regional or national market positions, etc., are critical determinants of the amount that MDP and TA will invest,” the firms said: “The Commission’s proposal to withhold all bidding information other than the high bid price will leave bidders in the dark and less able to evaluate each market. In the absence of a solid basis for evaluations, financial investors will either withdraw or reduce the amount of their investments because they have been forced to factor in additional elements of uncertainty and risk.”

An attorney who represents parties opposing blind bidding told us adoption would a “terrible mistake… The FCC has based its fears of collusion largely on theoretical academic studies that appear to have largely focused on the behavior of participants in early spectrum auctions that took place prior to the adoption of many of the current anti- collusion rules and policies.”

But Verizon Wireless questioned whether any bidders would be hurt if bidder identities remain secret. “In the first place, licenses can change hands as often as each round -- there is really very little known about who will be the eventual high bidder,” the carrier said.