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Incentive Auctions for Repurposing Broadcasting Spectrum

Incentive Auctions for Repurposing Broadcasting Spectrum. Evan Kwerel Federal Communications Commission Spectrum Markets: Challenges Ahead Kellogg School of Management Northwestern University June 2-3, 2011. Problem.

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Incentive Auctions for Repurposing Broadcasting Spectrum

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  1. Incentive Auctions for Repurposing Broadcasting Spectrum Evan Kwerel Federal Communications Commission Spectrum Markets: Challenges Ahead Kellogg School of Management Northwestern University June 2-3, 2011

  2. Problem • Develop a voluntary market mechanism to efficiently repurpose broadcast spectrum

  3. Repurposing Broadcast Spectrum: Two Auction Designs • Sequential auctions • Incentive auction – binding offers to sell spectrum (supply curve) • “Forward” auction – binding bids to buy spectrum (demand curve) • Determine amount of spectrum cleared (supply = demand) • Repack broadcasters and consummate winning offers • Double auction (Exchange) • Conduct first three steps above simultaneously • Repack broadcasters and consummate winning offers • Approaches essentially equivalent • Amount of spectrum cleared, winning sellers and buyers determined using full information about both supply and demand • But sequential approach is easier to implement

  4. Incentive auction to clear spectrum • Incumbents make voluntary binding offers to release spectrum • Share a channel in same market through multicasting with other broadcasters, while retaining must-carry rights for primary program stream • Discontinue OTA broadcasting • Move to upper VHF or lower VHF band • Find the least costly way to clear various amounts of contiguous spectrum in each market based on the price offers from incumbents (create supply curves) • FCC can involuntarily repack TV channels within each band to clear contiguous blocks

  5. “Forward” auction for cleared spectrum • Determine alternative band plans (depending on amount of spectrum made available) for new flexible uses, e.g., mobile broadband • Participants make binding bids to buy spectrum licenses (create demand curves)

  6. Determine amount of spectrum cleared Broadcaster Supply Price Wireless Demand Spectrum

  7. A Market Where Target Achieved When Clearing Cost Less Than Auction Revenue Broadcaster Supply Price Government Revenue Wireless Demand Spectrum Target

  8. Consummate winning offers and repack broadcasters • Collect payments from winners of forward auction and assign licenses • Make payments to winners of incentive auction • Reassign channels to broadcasters remaining on the air and compensate for moving cost • Deposit remaining auction revenue in Treasury

  9. Alternative – Double Auction (Exchange) to Simultaneously Clear and License • FCC conducts an exchange in which broadcasters offer spectrum (by channel sharing, discontinuing OTA broadcasting or moving to VHF) and mobile operators bid on new unencumbered licenses simultaneously. • Exchange simultaneously determines winning sellers, winning buyers and the amount of spectrum cleared.

  10. Thank You For further information evan.kwerel@fcc.gov

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