Mechanisms to incentivise shared-use of spectrum

A key concern with the Licensed-shared access (LSA) approach currently being developed by European regulators is that leaving incumbents and secondary users to agree to bilateral arrangements may be insufficient to incentivise an optimal level of sharing. We propose an efficient auction mechanism to incentivise incumbent users to offer shared access to the spectrum they use. The mechanism consists of two stages. In the first stage, LSA licences are auctioned. In the second stage, the incumbent is provided with a choice of either granting access under an LSA agreement to the winner of the auction or not. If the incumbent accepts, its existing licence fee is reduced, whereas, if it rejects, its existing licence fee is increased. The change in the licence fee is such that a rational incumbent always opts to share when it is efficient to do so, i.e. when the cost of sharing is below the value to the secondary user. We also explore how this simple mechanism can be extended to situations in which there is more than one incumbent in a band. Our proposed approach involves package (combinatorial) bidding and linear reference prices.