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Conclusion

94. The commercial allocation of spectrum in New Zealand has attempted to ensure spectrum is allocated to those with the highest valuation, assuming that this would result in it being put to its most valuable use.14 The current practice of assessing each situation as it arises enables the auction design to accommodate the changing profiles of the participants and relationships among lots. This practice is in line with other countries and seems to be appropriate.


95. The SAA remains the most appropriate method for allocating lots with complementary or substitutable characteristics. Alternative auction rules and mechanics can be tested to attempt to shorten the duration of the auction and to limit the use of "gaming" strategies like "parking". When designing future SAAs consideration should be given to:

  • non-discretionary bidding to reduce the cost and time taken to prepare bids, and limit the ability of participants to signal each other;
  • reviewing the method by which minimum valid bids are calculated to allow the price to increase more rapidly when competition is high;
  • reviewing how the number of rounds per day is determined; and
  • reviewing the rules and penalties for the withdrawal of standing high bids to deter "gaming" by participants.


96. The Ministry will continue to monitor the use of package bidding in the SAA by the FCC should be monitored with the view of assessing its applicability for future allocations in New Zealand. Where lots are shown to be strongly complementary and the complementarities vary across bidders, in theory package bidding can bring increased efficiencies and reduce the participation costs for bidders seeking to acquire groups of licences; however it is yet to be fully tested.

97. Where the assessment of a proposed allocation indicates that the SAA is not appropriate other auction methods should be considered, as illustrated by the planning of the allocation of the 3.5 GHz spectrum licences where a combinatorial tender will be used. Similarly the outcry auction can still be appropriate where licences are neither complementary nor substitutable (and issues related to bidders' budget constraints are not significant), or if they are substitutable they are essentially identical and participants only demand one licence. In the USA an Internet based SAA design has been used to replace the outcry auction, however the cost to modify the software and host such an auction in New Zealand may not be justified due to the associated revenue stream.

14 In limited cases allocation has been qualified to take into account the market structure, public good aspects and externalities.

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Last updated 2 July 2007