A column by The New York Times’ Eduardo Porter argues that the market for spectrum would be more competitive if the Federal Communications Commission would restrict AT&T and Verizon’s access to the upcoming incentive auction where the FCC hopes to reallocate television broadcast station spectrum for wireless carrier use. Mr. Porter’s column also cites an argument by Consumer Federation of America’s Mark Cooper asserting that keeping AT&T and Verizon out of the auction may even lead to higher revenues for the auction because smaller carriers would be encouraged to enter the auction and submit bids and the accompanying cash.
Sorry, but I just don’t buy that argument. The market for spectrum will always be a monopoly market. Why? Because there is only one supplier of access to spectrum and that supplier is the FCC. The FCC is a monopolist and as a monopolist it can set the price for spectrum way above the marginal cost for providing a license to those invisible waves rolling around the planet Earth. To raise more revenues from fewer participants, the bidders would have to increase the premiums on their offers or fewer bands of spectrum would have to be made available given the demand.
This is supposed to be an incentive auction for broadcasters, not a disincentive auction. If you want more broadcast stations to give up more of that beachfront property on that 300 Mhz to 3 Ghz coastline, broadcasters will want to know that you are serious about getting them the biggest bang for the buck and that’s only going to happen if they know that the big boys are playing, too.