Supply and Demand in Search of a
Market:
What are
?
The Case of Secondary Spectrum Markets
And What’s Their Role in Promoting
Efficiency?
Scott Wallsten
scott@wallsten.net
June 2, 2011
Spectrum Markets: Challenges Ahead
wrong
How much trading
should there be?
Auctions ensure newly released spectrum
goes to most efficient use.
But then what?
Potentially
available for
secondary
trades.
600
500
MHz
400
300
200
100
0
Cellular
700 MHz
AWS-1
PCS
EBS/BRS
Available Incentive
for mobile auctions
broadband
What areWhat’s
secondary
our objective?
spectrum markets?
Ensure that spectrum can flow to its highest-value use.
What are secondary spectrum markets?
Any market transaction after the initial allocation
except
those involving retail sales by initial leaseholder to end users.
Wholesale spectrum and network access
Wholesale spectrum and network access
Secondary Trades in Spectrum Licenses
Spectrum Allocation Methods in the U.S.
FCC created,
given right to
assign spectrum
Federal Radio
Act: Declared
spectrum a public
resource
1927
1934
Ronald Coase
suggests using
property rights to
assign spectrum
1959
FCC begins laying
the groundwork for
secondary markets.
1982
1994
2000
comparative hearings
Lotteries
auctions
Spectrum license trades and leases
FCC first attempted to promote secondary market with a policy
statement in 2000 defining necessary framework:
1. Clearly defined economic rights
2. Easy entry and exit
3. Full information on prices and products
4. Mechanisms for bringing buyers and sellers together
5. Many buyers and sellers
How are we doing?
1. Clearly defined economic rights?
YES
or
NO
≠
- Peter Cramton (paraphrasing)
2. Easy entry and exit?
3. Full information on prices and products?
Information probably not a binding constraint.
4. Mechanisms for bringing buyers and sellers together?
Website in December 2009
Website June 2011
5. Many buyers and sellers?
Number of Spectrum License Trades by Year
3,500
3,000
2,500
2,000
1,500
1,000
500
0
1994
1995
1996
1997
1998
1999
2000
2001
Cellular mobile
2002
Other
2003
2004
2005
2006
2007
2008
Cellular Mobile Trades in Billions of MHz-Pops
35
30
25
20
15
10
5
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Number of Spectrum Leases
700
600
500
400
300
200
100
0
2004
2005
2006
2007
2008
What do those numbers mean?
How to measure latent demand?
Number of STA Requests and Grants
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
requests
granted
Demand and supply curves?
Secondary trades come in many forms.
License sales and leases are common.
We don’t know what a working market
should look like.
Importance of secondary markets
grows with each auction.
Minimize costs associated with all types
of transactions, not just license transfers.
Thank you!