A report released today reiterates much of what we already know: restrictive spectrum rules aimed at achieving specific policy goals are mostly unsuccessful. I have previously written on this topic for the UK, which the report outlines in more detail, but both Canada and Germany have faced serious challenges and market distortions because of restrictive spectrum rules:
- In Germany, where regulators restricted participation in the 3G auction through spectrum caps, two new entrants withdrew from the market without deploying the newly acquired spectrum. This spectrum lay fallow for a decade and was reassigned in the 2010 4G auctions.
- A spectrum cap was in place for the Canadian PCS auction in 2001, butthe auction failed to enable the creation of a new national carrier, though new regional service was launched. After the cap wasrescinded, a merger reduced the national carriers from four to three.
- A 2008 Canadian auction of AWS licenses set aside 40 of 90 MHz for new entrants. The discriminatory rule distorted prices for both the set-aside and unrestricted spectrum – Canadian AWS spectrum sold for three times the average price for AWS spectrum in the U.S. – and failed to attract national entrants. There has been little impact on the combined market share of the three national carriers.
The FCC and carriers are getting ready for another major round of spectrum auctions and critics are again calling for restrictive rules. History tells us to be very wary.