Proposed No-Excess Supply Restriction Could Reduce Bidding in Incentive Auction, AT&T Expert Says
The FCC should reject a proposed incentive auction rule that would prevent a bidder from reducing the quantity of blocks it demands in a category if the reduction will result in aggregate demand falling below the available supply of licenses…
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in the category, said AT&T. Its filing includes a paper written by Yale economics professor Philip Haile. He called the provision a no-excess supply (NES) restriction. “For many bidders, licenses are complementary, which means that their per-license valuations are higher for pairs of licenses than for a single license,” the paper said. The NES restriction “makes it dangerous for a bidder to risk bidding any price above” its lower single-license valuation, he wrote. Doing so creates “substantial risk of being forced to choose between two money-losing options: (1) purchase a single license at a price exceeding its standalone value; or (2) buy the pair of licenses at a total price exceeding their value.” Because of the risk, bidders may bid more conservatively and drop their bids earlier, he said. A second paper by Haile opposes a U.S. Cellular proposal for using a point system to determine which licenses in the 600 MHz band a bidder will be assigned after the TV incentive auction (see 1504240023). U.S. Cellular’s proposal to give each bidder the same number of points in each market “would give a systematic and unwarranted advantage to bidders that have fewer feasible allocations,” Haile wrote in the second filing, which also is in docket 12-268. The carrier’s alternative proposal, in which bidders would “score” their preferences in each market, “would systematically disadvantage bidders seeking to build larger (e.g., 10x10 MHz) blocks of spectrum, and such a system also would not provide enough information about the intensity of bidders’ preferences,” Haile said.