Studies: Incumbents Blocked New Rivals in Spectrum Auction
Media Access Project Sounds Off on Advanced Wireless Services
By Kent Gibbons -- Multichannel News, 4/23/2007 2:04:00 PM
Public-interest law firm Media Access Project said incumbent broadband carriers, including large U.S. cable and phone companies, successfully blocked potential key new competitors -- including direct-broadcast satellite companies -- from winning wireless-broadband-spectrum auctions last year.
Through “retaliatory” bids aimed at scaring off bidders considered significant new threats, cable and telephone companies kept targeted newcomers from winning licenses in the advanced-wireless-services auction last August and September, according to studies prepared by economist Gregory A. Rose for the telecommunications-oriented nonprofit law firm.
MAP said the targeted new entrants included Wireless DBS, a notable bidding group because it combined both DBS powers, EchoStar Communications and DirecTV.
“Wireless DBS LLC was sufficiently blocked that it effectively withdrew from the auction after the 11th round,” one of the studies said.
By contrast, SpectrumCo -- backed by Comcast, Time Warner Cable, Cox Communications, Advance/Newhouse Communications and Sprint Nextel -- won about 61% of the licenses on which it bid, according to MAP. SpectrumCo said last October that it won 137 licenses in the auction, at a cost of $1.37 billion.
MAP’s report said other incumbents “notable” for making successful blocking bids were T-Mobile License and Cingular AWS, backed by big mobile providers.
MAP added that Verizon Communications “chose less frequently to engage in blocking new-entrant acquisition of national footprint,” yet it won about 62% of the licenses it bid on.
Targeted new entrants were defined as bidders that went after 10 or more licenses and were challenged by two or more incumbents at a rate that was statistically higher, by a certain amount, than the mean rate at which each incumbent challenged all bidders.
MAP wants anonymous bidding to be used in future government spectrum auctions to encourage more newcomers that wouldn’t be intimidated by bidding against large incumbents willing to spend a lot to deter a potential new rival.
The Federal Communications Commission in the AWS-1 auction used a hybrid formula that enabled open bidding -- favored by telecommunications incumbents -- if the number of qualified bidders indicated there would be at least three per license, MAP said. As it turned out, there were just enough qualified bidders before the auction -- a ratio of 3.05 per license -- but four of them never placed a bid and seven bid only once.
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