Spectrum auctions in India: lessons from experience

Abstract

Spectrum auctions have been used with significant success in many developed countries. From a regulatory and policy perspective, spectrum auctions ensure the efficient use of spectrum by allocating it to those entities that value it most, while also generating revenues for governments. But auctions may lead to unexpected outcomes due to unanticipated problems with their design leading to unexpected bidder behavior such as collusion and over-bidding. The key challenge before regulatory agencies is to design auctions in such a way as to meet the objective of fostering competition while at the same time ensuring that bidders can effectively use the spectrum for their business. While India was one of the early adopters of spectrum auctions, its success in service provision has been low. This paper critically examines issues in auction design that contributed to this delay and reviews the key elements in the design process namely a coherent regulatory framework, choice of service areas, flexibility for service area consolidation, standards and their role, convergence, managing public service regulation and managing defaults. The paper compares the handling of these elements in auctions in the United States (US), United Kingdom (UK) and Australia with the objective of drawing lessons for Indian policy makers.