The FCC may have left $22.5 billion on the table in the recently-concluded AWS-3 auction. At least that is the assertion of a new paper from the Phoenix Center.
The auction was a runaway success, generating almost $45 billion, far above pre-auction estimates and more than double the second-biggest auction take in the two decades that the FCC has been auctioning spectrum.
The praise for the FCC's auction has been bipartisan and full-throated, from various industry players to Hill Republicans and Democrats. For example, in an unusual pairing, Democratic chairman of the FCC Tom Wheeler and the Republican chairman of the House Communications Subcommittee, Greg Walden (R-Ore.), got together last week on a co-bylined op-ed celebrating the success of the ASW-3 auction
The paper acknowledges that success, but says it could have been even greater and the FCC could have raised billions of dollars more had it found spectrum to pair with the unpaired band (even if that meant a slight delay in the auction) and gone with an all-economic area (EA) approach to the licenses.
Lawrence Spiwak, Phoenix Center president and co-author of the study with chief economist George Ford, said that not using EA's exclusively could have added another $1.5 billion, and that finding more spectrum to pair with the 1695-1710 band "cost the U.S. taxpayer as much as $21 billion in lost auction revenue."
The paper even suggests that the record $45.5 billion is actually a failure of sorts, or at least a sign of the previous failure of the government to free up more spectrum from government users so there would not be so much pent up demand that is then reflected in the price of the auction.
“Unexpectedly high prices reflect demand or supply surprises,” said Ford, Phoenix Center chief economist. "The AWS-3 auction signals the industry’s low confidence with the government’s willingness and ability to increase the supply of spectrum for commercial purposes. These surprisingly high prices reflect a ‘get it while you can’ mentality.”
“Raising $45 billion is great, but leaving half that much on the table is an expensive mistake,” said Spiwak in announcing the study.
The next big "get it while you can" opportunity will be the broadcast incentive auction, currently slated for early 2016.