by George S. Ford, Lawrence J. Spiwak
May 01, 2014
As the Federal Communications Commission begins to formalize rules for the upcoming voluntary incentive auctions for broadcast spectrum, questions regarding participation limits on the largest domestic wireless carriers remain open. Proponents of bidder restriction on AT&T and Verizon appeal to a “revenue-enhancement hypothesis,” under which the participation by the more successful carriers will allegedly discourage bidding by smaller firms and thus reduce total auction revenues. We analyze data from a recent large-scale spectrum action to shed light on the validity of the revenue-enhancement hypothesis, and we find no evidence that AT&T and Verizon reduced the number of bidders for licenses. Moreover, we find no evidence to support the claim that lower auction revenues resulted from large firm participation. As participants, the two increased overall auction revenues, both by winning licenses and by helping to reveal the valuations of other bidders. Our findings contradict almost every aspect of the revenue-enhancement hypothesis.