Introduction

1. The allocation of scarce common resources is a difficult task.¹ Ownership structures that facilitate trade are not present and need to be created, valuation is difficult and, as with any government decision, allocation is subject to political sensitivities. Since 1996 New Zealand almost exclusively has used the simultaneous ascending auction for the competitive allocation of spectrum.² Although this process has been refined over time, issues still remain and recent discussions with the USA have stimulated discussion around how to commercially allocate radio spectrum.

2. This report builds on the Review of Radio Spectrum Policy in New Zealand (2005) through considering how New Zealand has competitively allocated radio spectrum, factors pertinent to auction design, and alternative options for competitive allocation. The report specifically sets out to answer Issue 4.4 of the review - What are the relative merits of different types of auction, and are some types more suitable than others for the various spectrum markets?

3. CRA International was engaged to review an earlier draft of this report; their comments have been incorporated into the final version where appropriate.

¹ In ITU Radiocommunications terminology, frequencies are allocated to services, and then within that allocation to services, assignment of frequencies within an allocation to users. In this paper, however, the term "allocation" is used in its economic sense, rather than in its formal Radiocommunications sense.

² The simultaneous ascending auction (SAA) format also is referred to as the simultaneous multiple round (SMR) auction format and the simultaneous multiple round ascending auction.