differences in terms of demographics, economy and the state of the mobile 

market at that time both internationally and nationally.   

Developing business plans for the life time of the licences based on 

sensible assumptions which can be used to calculate potential revenue 

and profit and from this a reserve price can be derived. 

Current costs for access to spectrum based on Administrative Incentive 

Pricing; 

Pre auction bid as in the case of fourth CMSPs. 

Generally part of the detailed auction design will involve determining the 

reserve price.         

It is important that the auction rules should make it clear what would happen if 

the reserve is not met so that bidders are not encouraged to bid low in the 

hope that the spectrum is still there to be licensed.  Low reserve prices 

encourage collusion because bidders see the potential of obtaining spectrum 

at well below the market price.  An example of the impact of low reserve 

prices is the Swiss 3G auction where the reserve prices were set at a level 

which was twenty times lower than the Government's predicted value.  

Consequently the Swiss auction resulted in the lowest per capita payment of 

any of the European 3G auctions. 

Where the reserve price is not met this indicates that the value placed on the 

spectrum by potential operators is less than that foreseen by the regulator.  

An illustration of how much value is placed on proven technologies is provided 

by the prices paid for GSM licences in developing countries, as the following 

table indicates.  Note that in some cases the amount paid as a percentage of 

national gross domestic product (GDP) for GSM licences is greater than the 

average amount paid (0.49) for each 3G mobile licence in the UK as a 

percentage of GDP. 

Amount paid for 

Amount per 

% of GDP 

Country 

GSM licence (US$)

capita ($) 

Algeria 737M 

24.71 

0.45 

Egypt 516M 

7.94 

0.22 

Morocco 1,100M 36.19 

1.01 

Turkey 2,600M 

40.93 

0.59 

Tunisia 454M 

49.11 

0.75 

Table 5.2:  Value placed on GSM licences in developing countries 

Potential market structure 

One of the key considerations in choosing an auction design is the extent to 

which it  will help to optimise the use of the available spectrum and promote 

competition in the market.  For example, the offering of a large number of 

small spectrum packages can be seen as advantageous in terms of facilitating 

multiple new entrants.  But if these can be aggregated to form much larger 

blocks, a small number of bidders may purchase all the available spectrum, 

possibly acquiring more spectrum than would be considered necessary for 

efficient spectrum use.  Furthermore, Dominant operators may be incentivised 

to bid more than new entrants in order to ensure that such new entrants are 

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