ANALYSIS: Spectrum auctions should stay, says expert

21 July 2014 | Kavit Majithia


A top consultancy firm has backed the validity of spectrum auctions, despite Capacity’s recent Confidence, Innovation and Leadership (CIL) survey reporting that a staggering 60% of operators were losing faith in the process.

Value Partners was Pakistan’s consultancy firm of choice for its 3G auction earlier this year and the company completed the process in four months, following a range of delays and failed attempts in the past.

As one of the last sizeable markets without 3G, Pakistan was in urgent need of a spectrum auction, which had previously been held back by regulatory issues and protests.

Value Partners was faced with a number of major challenges from initial market assessment through to auction completion.

“We had to design something that would accommodate the appetite for 3G, but also make an allowance for [Pakistan] to move to 4G without waiting another five years to run another auction,” said Colin Brooks, managing partner at Value Partners. Brooks said he was surprised at the high percentage of respondents that did not view auctions as the most effective form of spectrum distribution.

Spectrum auctions have a chequered history. The 3G auctions in Europe, for example, were thought to have played a defining role in the 2001 telecoms crash, which led to some 100,000 jobs being cut in the sector on the continent. Brooks believes, however, that despite initial teething problems, auctions now enjoy a “better status”.

In developed markets with an optimum of three operators, there is an alternative option to offer spectrum at a set price, but this does not allow for new players to enter a market. “Maybe there’s an evolution towards a different mechanism, but I think it has to be on a country-by-country basis,” said Brooks.

He highlighted common flaws in spectrum auctions in any country, including high prices, competitor collusion or processes not being followed correctly. But he added: “Without a spectrum auction, I’d be interested to know what the alternative is.”