Spectrum auction: the best option
ICASA recently withdrew its invitations to apply (ITAs) for spectrum in the 2.6GHz and 3.5GHz bands. These frequencies, specifically the 2.6GHz band, are highly suited to the roll-out of pre-4G technologies like mobile WiMAX (802.16e) and Long Term Evolution (LTE).
At a seminar on Broadband Wireless Band Spectrum hosted by the South African Institute of Electrical Engineers (SAIEE), Professor Alexander Zimper from Wits University discussed the merits and pitfalls of various auction types.
Zimper analyzed various auctions types using a special kind of game theory and shared his conclusions on the suitability of the various auction forms for South Africa’s spectrum situation.
According to Zimper, if there exists a highly competitive industry with many aggressive competitors, any auction form will do. In a highly collusive environment where new entries are unlikely, on the other hand, he believes that only high reserve prices would help.
While Zimper conceded that there are some behavioural arguments in favour of entry fees as well as an ascending auction, he was sceptical about the idea that a specific auction form would avoid implicit collusive behaviour.
During a panel discussion Zimper voiced his concern over ICASA’s “use it or lose it” policy. The controversial policy required that operators provide coverage with the awarded spectrum to 50% of South Africa within 2 years or face losing their license.
Zimper asserted that such a policy would devalue the spectrum and would actually favour incumbents rather than motivate smaller operators to attempt to compete. This was met with a counter argument that a “use it or lose it” policy was necessary to prevent operators from buying spectrum to deny competition access to it.
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