kept out of the market, thus reducing competition and pressure on the 

dominant operators to reduce prices or improve service. 

It may therefore be preferable to predetermine the number of winning bidders 

by pre packaging the available spectrum or using a spectrum cap, and to 

encourage new entrants by either making the number of spectrum packages 

exceed the number of incumbents or reserving one or more licences for new 

entrants.  This approach has to take into account the necessary spectrum for 

a new entrant to compete effectively with existing players, or provide other 

means of levelling the playing field.  

If the number of spectrum packages is the same as the existing number of 

operators then it is unlikely that any new players will bid.  In the Netherlands 

this was the case and the only new entrant that entered the auction withdrew 

early and the prices paid by the winning bidders were significantly less, per 

capita, than in the UK. However this has to be considered together with the 

requirement to have sufficient spectrum for existing licences, which has been 

discussed earlier. 

Default after winning 

It is important that penalties are imposed to avoid winners defaulting after the 

end of the auction (i.e. being unable or unwilling to pay the amount bid by the 

specific deadline).  If the penalties are small it can encourage the entry of less 

well financed bidders who are taking an opportunistic approach in the hope of 

obtaining the necessary financial backing once they have been allocated 

spectrum.  This can lead to spectrum not being used and additional costs to 

the Regulator in re licensing the  returned  spectrum.  Pre auction 

qualification requirements can also address this problem by ensuring the 

bidders are financially viable. 

5.9 

Blocks in which spectrum to be allocated 

One of the issues in spectrum allocation pertain to the amount in which 

addition spectrum be made available to 2

nd

 generation and 3

rd

 generation 

mobile operators and the amount that should be made available to new 

entrants for starting service. 

One option is that spectrum upto the level decided in preceding section be 

reserved for existing operators and future allocations be done in chunks of 2 X 

5 or 2 X 10 MHz so as to enable IMT 2000 services in 1800 MHz as well as 

IMT 2000 bands.  

The existing Service Providers be given an opportunity to increase their 

spectrum availability wherever available in chunks of say 2 X 2.5 MHz 

provided they meet the minimum technical requirements. 

Alternatively, allocation of spectrum can be in blocks of 2 X 5 or 2 X 10 MHz 

after the minimum reserved for existing operators is achieved so as to enable 

IMT 2000 services. This would be reserved only for a period of say 2 years. 

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