I was confused about the anonymous bidding process chosen by the FCC as it auctions off our hope the 700mH spectrum. So, I asked Harold Feld, who kindly wrote back with the following explanation (used with permish, of course):

Anonymous bidding: Until now, the FCC has published at the end of each
round who bid what for every license. This is called an “open”
auction format. When the FCC created this format, it was thought that
maximizing the information available to bidders would maximize
efficiency of the auction and thus maximize revenue.

After more than ten years of FCC auctions, it has become obvious that
the theory is completely, utterly and horribly wrong. What open
bidding does is allow parties to signal each other and to target new
entrants for attack. Through open bidding, the largest incumbents
exclude new entrants and divide the licenses among themselves cheaply.
The smaller players go along, because they survive by avoiding
direct conflict with the bigger players and also like to exclude new
entrants.

Under anonymous bidding, the FCC only provides the amount of the
highest bid on each license at the end of the round. Thus, everyone
can see what bid they must beat, but they do not know who has bid on
the license. Nor can they see other bids besides the winning bids,
which can be used for signaling. This makes it much more difficult
for incumbents to rig the auction in their favor because they cannot
coordinate attacks on new entrants and they cannot enjoy the benefits
of a reputation for retaliation.

Greg Rose has done two important studies on anonymous bidding. The
first was a ten year longitudinal study of FCC auctions for the Center
for American Progress (with Mark Lloyd). The other was two studies on
last summer’s AWS auction for New America Foundation.

Here are links to the studies:
Initial post on anonymous bidding
Post with link to CAP study
Post with links to AWS studies

Combinatorial bidding, which the FCC approved for the 6 REAG licenses
in the “C” Block, is a way to minimize the “exposure risk” and
encourage people to bid more aggressively. Here’s the theory.
Suppose I want to build a national footprint, but I’m afraid I won’t
win all the licenses necessary. I am therefore afraid to bid at all,
because I may get stuck with licenses I don’t want and have to sell
them at a serious loss.

With combinatorial (or “package”) bidding, I am only required to pay
for the licenses if I win the entire package. If I don’t win the
whole package, all my winning bids are rendered null and void. So I
can now bid agressively without fear and am encouraged to enter the
auction and try for a national footprint.

The big potential new entrants, like Google and the DBS companies,
wanted package bidding. So did AT&T and Verizon. We at PISC
supported it because it encourages a national new entrant and doesn’t
make it that much easier for the incumbents, who are likely to win
anyway.

I rely on Harold’s blog, as well as his other writings, for help understanding the complexities of this stuff… [Tags: fcc harold_feld 700mh wifi ]

Categories: Uncategorized dw