The Biggest Auction Ever: 3g Licensing in Western Europe (a)

Abstract

In the spring of 2000, nine Western European governments were preparing for the sale of licenses that would allow private operators of 3G networks to use certain blocks in the spectrum of radio frequencies. The governments' objectives included the competitiveness of the resulting telephony market, an efficient allocation of licenses, and the generation of revenues to supplement governmental budgets. Most governments were considering the use of auctions to sell their licenses in the private market. Different countries faced different market conditions, and differed in their preferred choice of auction format.

Excerpt

UVA-QA-0627

The Biggest Auction Ever:

3G Licensing in Western Europe (A)

In the spring of 2000, the governments of Austria, Belgium, Denmark, Germany, Great Britain, Greece, Italy, the Netherlands, and Switzerland were preparing for the sale of licenses that would allow private operators of third-generation (3G) networks to use certain blocks in the spectrum of radio frequencies. The governments' objectives included the creation of competitiveness in the resulting telephony market, an efficient allocation of licenses, and the generation of revenues to supplement governmental budgets. Based on previous experience with allocation by committee (“beauty contests”), most Western European governments were considering the use of auctions to sell their licenses in the private market. Different countries faced different market conditions, and differed in their preferred choice of auction format.

Third-Generation Wireless Technology

3G wireless technology, a new standard in wireless communication, increased transmission speeds from 9.5 kilobytes to 2.0 megabytes per second and allowed mobile telephony to interface with the Internet. The new technology made it possible to broadcast television signals across mobile-telephone networks, and to provide mobile video-conferencing, high-speed Internet access, and high-volume e-mailing through mobile telephones (Exhibit 1). Such applications could revolutionize the professional and recreational use of mobile telephony and open new frontiers in e-business.

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Keywords: telecommunication licensing auctions