3.5 Type of auction

60. The two types of auction considered by the Ministry are:

• A simple “outcry” auction run by an auctioneer.
• A “simultaneous ascending auction” (SAA) run via the internet, which involves on-going bidding until all the bidding on all lots has stopped.

61. More information on auction design is available in a Ministry report.
62. The advantage of an outcry auction is that it is simple and fast. However, one risk for bidders in an outcry auction is that the first lots sell for much more or much less than later lots. It is also difficult to run an outcry auction when the lots on offer are complex and bidders want to purchase a particular combination of lots depending on what other lots they have won. 
63. An SAA auction offers the opposite features: it is much more complex and time consuming to run but offers much improved prospects for bidders to obtain the lots they want and it allows for better and fairer price discovery. This method has been developed and used by the Ministry in most radio spectrum auctions and is familiar to the New Zealand radiocommunications industry.
64. The Ministry proposed that the 2.3 GHz auction should be by way of simple “outcry” auction. Most submitters agreed with this proposal, but some advocated an SAA auction.
65. In principle the form of the auction should follow consideration of the optimal lot design. As a general rule, the more complex the lot design, the more likely it is that an SAA auction offers net benefits. Nonetheless, if there are strong preferences about auction method, then the form of the auction is a relevant consideration in lot design.

Question 1: Considerations relating to lot design

Do you agree with the considerations discussed in this chapter concerning lot design?
Please provide any comments under the following headings:

1. Expected technical developments and likely demand.
2. Size and location of the managed spectrum park or parks, including:
   1. whether two MSPs should be provided for in the 2.5 GHz band in order to allow for FDD (including CMAR) uses.
3. Acquisition limits.
4. Technical issues such as:
   1. accommodating TDD and FDD technologies;
   2. guard-bands;
   3. other.
5. Preferences regarding auction type.
6. Other.