The Indian 3G and BWA Auctions
20 Pages Posted: 20 Jan 2012
Date Written: October 1, 2010
Abstract
On April 9, 2010, after much delay, the Indian government began two auctions to license third generation cellular (3G) and broadband wireless access (BWA) spectrum. The Indian wireless market has been hugely successful to date with a very competitive marketplace of more than 400 million 2G subscribers and some of the lowest pricing in the world. Yet, India has not deployed any 3G networks and has only limited wireless data access. Consequently, licensing the spectrum available in these auctions constitutes an important next step in the development of the Indian wireless marketplace.
This paper evaluates the Indian auctions along several dimensions. The first is the technical features of the auction design. This auction represents somewhat of a break from previous spectrum auctions in that it uses a clock auction format more typical of electric supply auctions.
The key departure from standard spectrum auction formats is that bidders contend for generic blocks of spectrum in specific geographic areas — specific frequency assignments are made after the auction concludes. However, the translation of the clock auction format from electricity procurement to spectrum assignment is not complete. For example, when bidders stop bidding on a license area — the equivalent of a product in an electric procurement auction — they are not required to submit an exit price. This, and other design issues, is expected to reduce the efficiency of the auction process.
This paper will also evaluate the auctions on the criteria set out by the Indian Department of Telecommunications. Included in its stated goals are to promote competition in the market for 3G services and maximize revenue to the government. With nine 2G incumbents bidding for only 3 or 4 licenses in each geographic area, the competitive structure of the 3G market will be substantially different from that of the 2G market. The auction rules, including rules on blind bidding, make it impossible for bidders to use the auction process to find reasonable, coordinated sub-national groupings of licenses that would allow for bill and keep roaming arrangements that would effectively increase the number of national 3G players. Revenues, however, were likely maximized.
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