Spectrum mania and network neutrality

Now that bidding has concluded on the FCC’s AWS-3 spectrum auction, the spinning commences on the significance of the results; some advocates are, for example, saying the auction results show that the Title II telecom regulations proposed for Internet services won’t deter investment.

Overall, the auction will gather $41.5 billion for the treasury; this amount is wildly in excess of the expert estimates of $12-16 billion. We don’t know who the actual winners are yet; only the bidders and the FCC will know that until down payments are due in January. It’s not even certain that the high bidders will win all the licenses because of quirks in the way awards are made. There is a media consensus that Dish Networks pushed prices up, not so they could win licenses, but so they could increase the value of their spectrum holdings in adjacent bands. Dish’s strategy is probably similar to one Google employed in the D-Block auction, where they ensured the reserve price was met for spectrum encumbered by open access provisions and then stopped bidding. Dish has been talking to T-Mobile owner Deutsche Telekom about a takeover of the fourth-largest US carrier, and action may be imminent. The Dish play is to increase the value of its spectrum holdings so it can borrow more money to spend on T-Mobile. These holdings may have been worth as much as $26 billion before the auction and will be worth even more now. If this is the case, it’s reasonable to claim that the auction proves that acquisitions and consolidation cause the value of scarce resources to increase, irrespective of pending regulations.