December 2008 -- The economic analysis of spectrum policy focuses on government revenues in license assignments. Auctions generating high bids, as in Germany and the UK, are identified as “successful,” while those producing lower receipts, as in Switzerland and the Netherlands, are deemed “fiascoes.” Yet, even full and costless extraction of license rents does not map directly to social welfare, because spectrum policies creating rents impose social costs. Most obviously, rules favoring monopoly market structure predictably increase license values, but reduce welfare. This paper attempts to shift analytical focus to the relationship between spectrum policy (including license auctions) and efficiency in output markets. In cross-country comparisons of performance metrics in 28 mobile telephone markets, empirical estimates suggest that countries allocating greater bandwidth to licensed operators and achieving more competitive market structures realize demonstrable social welfare benefits. These gains generally dominate efficiencies associated with license sales. Spectrum policies and rules intended to increase auction receipts (e.g. reserve prices and subsidies for weak bidders), should be evaluated in this light.
Citation
"A Welfare Analysis of Spectrum Allocation Policies” by Thomas W. Hazlett & Roberto E. Muñoz, 40 RAND Journal of Economics 424 - 454 (2009), Quick Links: Thomas Hazlett, Roberto E. Muñoz
Related Scholarship
"Tragedy T.V.: Rights Fragmentation and the Junk Band Problem" by Thomas Hazlett, October 2, 2009 (forthcoming publication Spring 2010), Quick Links: Gridlock Economy Conference
"U.S. Wireless License Auctions: 1994-2009" by Thomas Hazlett, ACCC Conference in Brisbane, Australia, July 14, 2009, Quick Links: Thomas Hazlett
"A Welfare Analysis of Spectrum Allocation Policies” by Thomas W. Hazlett & Roberto E. Muñoz, 40 RAND Journal on Economics (forthcoming, Autumn 2009), Quick Links: Thomas Hazlett, Roberto E. Muñoz
"Property Rights and Wireless License Values" by Thomas W. Hazlett, 51 Journal of Law and Economics 563-98 (August 2008), Quick Links: Thomas Hazlett
"A Law & Economics Approach to Spectrum Property Rights: A Response to Professors Weiser & Hatfield" by Thomas W. Hazlett, 15 George Mason Law Review 975-1023 (June 2008), a response to "Spectrum Policy Reform and the Next Frontier of Property Rights" by Philip J. Weiser & Dale Hatfield, 15 George Mason Law Review 549-609 (Spring 2008), Quick Links: Thomas Hazlett
"A Rejoinder to Weiser and Hatfield on Spectrum Rights" by
Thomas W. Hazlett, 15 George Mason Law Review 1031-39 (June 2008), a rejoinder to: "Property Rights in Spectrum: A Reply to Hazlett" by Philip J. Weiser & Dale Hatfield, 15 George Mason Law Review 1025-30 (June 2008), Quick Links: Thomas Hazlett
"Optimal Abolition of FCC Spectrum Allocation" by
Thomas W. Hazlett, 22 Journal of Economic Perspectives 103-28 (Winter 2008), Quick Links: Thomas Hazlett
