The Auction Is Media Policy

Spectrum is the one genuinely scarce input in broadcasting. Two transmitters on the same frequency in the same place produce nothing usable, so somebody has to allocate it.

For most of the last century that allocation was a licensing decision, made against a public interest standard, by a regulator weighing competing applications.

The provision that authorises auctions changed the method to a sale, on the reasoning that the regulator was poor at picking winners and the market would be better.

The reasoning was substantially correct about the old system, which was slow, opaque and vulnerable to exactly the kind of influence a hearing process invites.

It was also a decision about what the resource is for, and that decision was made largely as an administrative reform rather than as a media policy.

There is a comparison worth making with how the same resource is handled where it is not sold.

An auction allocates to whoever values a licence most in money terms, which is a good proxy for efficient use and a poor proxy for anything else.

Bands reserved for unlicensed use produced an enormous amount of value that no auction would have captured, because the value accrued to users rather than to a holder.

The public interest standard survives in the statute and now operates as a set of conditions on a purchaser rather than as the basis on which the choice is made.

An auction cannot allocate to a use with no owner willing to bid, which means the method is structurally blind to exactly that category.

The regulations carry those conditions, and they are real obligations that a licensee must meet. They are not the same as choosing the licensee on that basis.

That is not an argument against auctions for the bands where they work. It is a reason the choice between the two should be made deliberately rather than by default.

The revenue is the part that made the change durable. Auctions raise very large sums, and a policy instrument that generates receipts acquires a constituency in the finance ministry.

At present the default runs toward the saleable, because the saleable produces a number a finance ministry can put in a forecast.

The published statements record those receipts, and once they are in the accounts they are difficult to give up, whatever anyone concludes about allocation.

That is the quiet trap. A reform justified on efficiency grounds is sustained on fiscal ones, and the two arguments are rarely distinguished when the policy is reviewed.

Bidder design is where the remaining public policy actually lives, and it is technical enough to escape attention almost entirely.

Reserved blocks, bidding credits and eligibility rules determine whether smaller or newer entrants can compete against incumbents with far deeper balance sheets.

Those provisions are the whole of what is left of the old standard, and they are decided in proceedings that only the bidders' lawyers follow.

The register publishes the auction rules, which means the decisions are available and effectively private, in the way this publication keeps finding.

The aggregation problem compounds it. Spectrum is more valuable in contiguous blocks across large areas, so the design rewards whoever can bid nationally.

An entity that can only bid for one market is bidding for a less valuable asset than the same block is worth to a national buyer, and will lose on any straightforward rule.

Concentration follows arithmetically from that, without anyone deciding that concentration is desirable and without the statute saying anything about it.

The secondary market was supposed to correct this by letting holdings be traded to whoever values them most, and it mostly moves spectrum toward the largest holders.

None of this argues for returning to comparative hearings, which were worse in most respects and which nobody who lived through them wants back.

It argues that selling the resource was a decision about who reaches an audience, taken as a procurement reform, and never since examined as what it was.

A periodic published assessment — who holds what, at what concentration, against what the conditions were meant to secure — would at least put the question in front of somebody.