MAP Study Claims to See Collusion by AWS Auction Bidders
The Media Access Project (MAP), while citing “collusion” in the 2006 AWS auction (CD April 24 p8), isn’t saying carriers broke the law or FCC rules, Gregory Rose, who completed the study on which MAP based its allegations, told us Wed. Rose found “more than tacit collusion may have been involved” in bidding for 2 of the auction’s largest licenses.
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“Under current FCC auction rules I do not think it is illegal for bidders to discuss who they want to keep out of an auction and to make arrangements to intervene to keep those other potential bidders from successfully acquiring spectrum,” Rose said: “If they did it while an auction was going on, that would be an explicit violation of the rules. If they do it before the auction begins, it isn’t.”
Rose said the hardest evidence of collusion evinced itself in bidding for the Regional Economic Area Grouping (REAG) D and E licenses sought by Wireless DBS. The data seem to show carriers may have collaborated against a deep-pocketed partnership of DirecTV and EchoStar, collectively hoping to keep that duo from purchasing spectrum.
“SpectrumCo [entered bids] in the first round against Wireless DBS 56.33% of the time when it entered,” the report said: “T-Mobile License entered in the first round 75.00% of the time when it entered. MetroPCS AWS LLC entered in the sixth or ninth rounds 66.67% of the time when it entered. Barat Wireless LP entered in the eighth round 75.00% of the time when it entered. Cingular AWS LLC entered in the ninth or tenth round 75.00% of the time when it entered.”
T-Mobile Wed. slammed the MAP charges. “The MAP allegations are reckless, irresponsible, and just plain wrong,” Tom Sugrue, vp-govt. affairs, said: “By any measure, the AWS auction was a huge win for competition in the wireless marketplace. It is no secret that T-Mobile bid aggressively in the AWS auction because it had a significant need for more spectrum to remain a strong competitive force in the wireless market. Others did the same, and the result was that both existing carriers with clear spectrum needs and new entrants were able to secure spectrum in numerous markets around the country.”
One industry source questioned whether MAP demonstrated collusion. “These were highly desirable properties and these were all major bidders who were serious about buying properties and actively bought licenses,” the source said: “I don’t know what it proves. It proves there was intense bidding on certain highly sought after properties. “
“The one thing that was a surprise was the suggestion in the pattern that there might have been some explicit collusion before hand,” MAP Senior Vp Harold Feld said: “There may have been more than just the tacit collusion that we would have predicted.”
“There is evidence of a plan to do this that was probably conceived before the auction began so it didn’t technically violate the rules, but which produced highly uncompetitive outcomes and reduced demand,” Rose said Wed.
MAP claimed to have documented other anticompetitive practices, including retaliatory bidding, during the AWS auction. Rose determined that 0.19% of all bids in the AWS-1 auction were placed to “retaliate” against another bidder and to discourage competition. That’s up from 0.16% of all bids in the 1997 PCS auction, using methodology developed by Peter Cramton and Jesse Schwartz.
“The absence of anonymous bidding in the AWS auction afforded opportunities for incumbents to identify new entrants who represented a serious competitive threat and block them by concentrating collectively on rapidly outbidding them on licenses necessary for acquisition of a national AWS footprint,” the study concluded.
The number of retaliatory bids overall was low -- just 31 of 16,197 in the AWS-1 auction -- but even a few can reduce competition, Rose said Wed. “Even a very small number of retaliatory bids can have considerable indirect demand reduction effects,” he said: “The bidder is signaling not only to the bidder he is bidding against but to everyone else in the auction that if you screw with me there are going to be consequences. If you oppose me, I will impose costs on you. Once other bidders see this happen they tend to avoid challenging that bidder.”
Retaliatory bidding is used most often by smaller auction participants, Rose said., promising to provide more detail in a study now in development. “The major incumbents… tend not to use retaliatory bidding because they're so well capitalized and don’t need it,” he said. Rose also said he’s working on a study about signaling behavior across all FCC auctions.