Using Auctions to Select FCC Licensees
Evan Kwerel and Alex Felker.
OSP Working Paper 16 (May 1985) examines the way in which the FCC manages the radio frequency spectrum. Traditionally, the Commission has performed this duty by first allocating a portion of spectrum in a given area to a particular purpose. Then the Commission assigns channels within an allocation to individual licensees. Both allocations and assignments have important implications for consumer welfare and have been the subject of many public policy analyses.
The authors examine only the assignment process and assume no changes are made in either the current eligibility criteria for holding a license or the terms, conditions, or rights of a license. The basic approach used here is the same as that used by Carson Agnew (1983) in his study of alternative licensing arrangements for multipoint distribution service (MDS).
They argue that, in more cases, auctioning previously unassigned channels is likely to result in the same ultimate assignment as present mechanisms. Yet, because auctioning would require winning bidders to make substantial payments in return for being licensed, auctions are an efficient way of reducing the number of applicants. The authors therefore conclude that auctions are likely to impose lower costs on the Commission and society then the other methods considered.