Spectrum pricing for commercial mobile services: A cross country study

The Simultaneous Multiple Round Ascending (SMRA) Auction has become a defacto standard auction mechanism for the award of radio spectrum for commercial mobile services around the world. The winning bid price in such SMRA spectrum auctions is of interest, as it determines the valuation of the scarce resource by the mobile operators, and also indicates the revenue accrued to the governments as auction proceeds. This report uses a cross-country panel dataset to examine the determinants of spectrum prices of all the SMRA auctions held in 25 countries from 1994 to 2019. Our findings indicate that reserve prices, fixed by the auctioneer as the starting price of auctions, and the competition in the auction are the two variables that significantly affect the winning bid prices in SMRA auctions. The effect of reserve prices is more pronounced in regional auctions held in countries such as the US and India. Additionally, the larger the amount of spectrum put on auction, lesser is the winning bid price, indicating the traditional supply-demand relationship. Based on these findings, we provide policy prescriptions on fixing appropriate reserve prices, providing a clear visibility of spectrum availability, and increasing competition in mobile services for the effective use of scarce radio spectrum.