A Stanford professor who led the team that helped design the FCC’s most recent incentive auction is advocating for an auction process uniquely tailored to the 3.5 GHz CBRS band.
While mobile operators are arguing for longer—like 10-year—license terms for the 3.5 GHz band instead of three years, Stanford Professor Paul Milgrom argues that three-year license terms are not only achievable but the licenses could be auctioned in a way that would allow incumbents and new entrants to participate.
To be sure, Milgrom was commissioned by WiFiForward and WISPA to prepare a letter (PDF) to the FCC with his comments and recommendations, and both of those groups are opposed to CTIA and T-Mobile’s petitions for changing the CBRS rules. But his background as one of the experts who introduced the initial design for sales of radio spectrum licenses in the United States and his extensive experience with spectrum auctions are significant. From 2008-2012, he was the worldwide auction consultant for Vodafone. Working through the firm Auctionomics, he also led the consulting team for the FCC that designed the 600 MHz incentive auction and provided computational software.
In a reply comment in the FCC’s docket on CTIA and T Mobile's petitions, Milgrom proposes some simple ways to accommodate a high-volume and diverse group of large and small bidders. While some commenters have suggested that the sheer number of license areas to be auctioned under the existing rules make it impractical to conduct an auction, he says there is clear real-world evidence that it is possible to conduct many simple auctions on a single platform in a short period of time.
By way of example, he points out that eBay has about 1 billion active listings for physical goods at any one time. Google alone serves about 40,000 searches every second, and its ad revenue from auctions exceeded $79 billion in 2016.
But are similar auctions suitable for radio spectrum licenses? Milgrom says the kinds of auctions the FCC has used in the past are more complex than the ones used by eBay or Google. But he concluded that there remains a strong case for a very simple auction design for the 3.5 GHz band, and the type of auction he suggested could be easy for bidders and fast to implement, making it easier to encourage competition and leading to more efficient outcomes and higher license prices.
His proposed auction system for 3.5 GHz would offer bidding credits for incumbents. Licenses with three-year terms would be made available for sale every three years on a staggered schedule. The general format would involve an auction whereby licenses would “depreciate” periodically by a factor of X and licensees would need to repurchase that fraction to maintain full license rights.
"Even with tens of thousands of census-tract-sized regions, licenses to use the 3.5 GHz spectrum can be sold in a simple and efficient auction, without complexity for bidders or computational burden for the FCC," he concluded. “The characteristics of the 3.5 GHz spectrum and the FCC’s priority licensing scheme obviate the need for the relatively complex auction designs that have been used to sell licenses for other frequencies.”