Journal Article

Awarding telecom licences: the recent European experience

Tilman Börgers and Christian Dustmann

in Economic Policy

Published on behalf of Center for Economic Studies of the University of Munich

Volume 18, issue 36, pages 215-268
Published in print April 2003 | ISSN: 0266-4658
Published online July 2014 | e-ISSN: 1468-0327 | DOI: https://dx.doi.org/10.1111/1468-0327.00106
Awarding telecom licences: the recent European experience

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This paper analyses the procedures used by different European countries for awarding spectrum licences to potential operators of third generation (3G) mobile telephone networks. We contrast market-based methods, such as auctions, with bureaucratic methods, such as ‘beauty contests’. They have been used for decisions about two major questions: (1) How many licences should be awarded, and how much spectrum should each licence give access to?; (2) Which companies should receive which licences, and how much should they pay for their licences? Most countries used a bureaucratic process to answer the first question. However, Germany, Austria and Greece were different, and constructed auctions in which the number and size of licences were determined by the auction itself. As for the second question, there was much variation between countries, and both auctions, and ‘beauty contests’ were popular methods. We have four main findings. First, the bureaucratic procedure used by most countries to answer the first question led to companies concealing relevant information from the authorities. Second, while firms may have tried to manipulate the procedures used in Germany, Austria and Greece to deter entry to their markets, they were surprisingly unsuccessful in this. Third, the traditional economic criticisms of beauty contests seem to apply to some, but not to all those that were conducted. Finally, the bidding strategies adopted by the telecom companies were often more complex than those predicted by economic theory.

— Tilman Börgers and Christian Dustmann

Journal Article.  23434 words.  Illustrated.

Subjects: Economic Growth and Aggregate Productivity ; Financial Regulation ; Health, Education, and Welfare ; Labour and Demographic Economics ; Macroeconomics and Monetary Economics ; Public Economics ; Regional Government Analysis

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