spectrum.  Auctions might also be used if the spectrum packages to be 

offered differ and would be valued differently by the bidders.  For example, in 

the German 3G mobile auction the amount bid per MHz for paired spectrum 

was around 30 times higher than that bid for unpaired spectrum, reflecting the 

greater utility that paired spectrum was felt to have at the time. 

Most auctions involve bidding fixed sums which may be payable either as a 

single lump sum on licence issue or in instalments over the duration of the 

licence.  However, in some cases, notably Hong Kong, bids have taken the 

form of a  royalty  payment where the amount bid is expressed as a 

percentage of revenue over time. 

The US Federal Communications Commission (FCC) was one of the first 

Regulators to use auctions. 

One of the disadvantages often voiced against auctions is that the auction 

costs will be passed on to users through higher tariffs for their services.  It is 

argued that this does not apply to auctions where the winning bidders will 

make a single up front payment as when the services are marketed they will 

only charge the prices that maximise their profits and are necessary to 

compete with the other Service Providers.  This argument is supported by the 

UK experience to date, where the recently launched 3G network offers lower 

basic call tariffs than established GSM operators, despite the very high 

payment made in the UK auction. 

The situation may be different in the case of auctions with a royalty fee as the 

amount paid by the winning bidders will depend on their annual revenues and 

therefore will potentially have an impact on the prices that are charged to end 

users.  

The key to the success of an auction is the design, which must address a 

number of concerns, and objectives, some of which are shown below: 

Avoidance of collusion between participants to avoid high prices. 

Encouraging a sufficient number of bidders, particularly new 

market entrants. 

Setting of appropriate reserve prices 

Packaging of spectrum licences (i.e. amount of spectrum 

associated with each licence that is offered) 

Potential market structure 

Default after winning the auction 

Type of auction . 

Experience of both successful and unsuccessful auctions demonstrates that 

there is no single auction design that can be used universally and expert 

advice is required.  However it is noted that in many countries they have used 

multiple round auctions with the differences including: 

whether there are national or regional spectrum packages,  

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