What Really Matters in Spectrum Allocation Design

10 Nw. J. Tech. & Intell. Prop. 93 (2012). Thomas W. Hazlett, Professor of Law & Economics, George Mason University School of Law, Roberto E. Muñoz, Senior Fellow, Information Economy Project and Professor, Federico, Santa María Technical University, Santiago, Chile, Diego Avanzini, Visiting Scholar, Information Economy Project.

Wireless license auctions have successfully replaced “beauty contests” in many countries. Competitive bidding (1) puts spectrum rights in the hands of the most productive firms; (2) reduces rent-seeking costs; and (3) captures license values for the public, potentially reducing costly tax distortions.  Economists and policy makers have asymmetrically focused on (3). Yet, the overwhelming consumer welfare gains are produced in output (retail services) markets, not by extracting revenues from the sale of spectrum inputs. This fact leads to powerful policy implications, supporting liberal policies that permit market rivals to (quickly) access abundant bandwidth. Full Text Available at http://ssrn.com/abstract=1961225.

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