Krugman points out that its important to acknowledge when you get big things wrong. I will point to two places in spectrum auction theory. First, in 2007, I bet wrong on whether large geographic areas or small geographic areas were the right way to go to encourageb new entrants. I bought the argument of the larger players, DISH and GOOG and others, that the need for a national footprint necessitated big license areas to mitigate the risk. This turned out to be wrong -- largely I think because I underestimated the bidding advantages of incumbents. If you have to buy a lot of crap real estate in the Midwest to get Chicago and the other major markets, you will do that. Large incumbents have several natural advantages over potential new entrants (pre-existing customer base, pre-existing network allow them to better extract value) so they can, under rational actor theory, bid higher. And, as we saw in the 700 MHz auction, they did. More recently, I was pretty skeptical that the AWS-3 auction would generate more than 10 billion. I thought the reduced number of national bidders (or even strong regional players like MetroPCS), improvements in wireless efficiency, and the potential upcoming broadcast incentive auction would work to depress prices. Obviously I was wrong. Bidding in AWS-3 has been highly aggressive. Some of that may be that financing is so cheaply available, T-Mos resurgence makes it easier for them to get capital, Ergen has new spectrum that make DISH capable of deploying a real network if they get enough AWS-3 (and it plays well with both their H-Block and LightSquared spectrum), and -- of course -- anonymous bidding prevents the players from avoiding conflicts and divvying the licenses p among themselves. Well need to see the post-AWS-3 analysis to really know for sure, but I confess I am seriously re-evaluating my expectations for revenue on the incentive auction.
Posted on: Wed, 19 Nov 2014 17:18:42 +0000
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