It’s been a decade since Industry Canada began auctioning spectrum licences for wireless communications services, such as cellular phone and Blackberry services. The auction program has been highly successful, raising almost $6-billion for Canadian taxpayers.
In Chicken Little Eats Crow: How the Critics Got it Wrong about Spectrum Auctions, AIMS Director of Research Ian Munro reviews the controversy over the auctioning of wireless licences and concludes the naysayers were wrong. The sky hasn’t fallen; these auctions actually have resulted in hundreds of licences being placed in the hands of service providers quickly, efficiently, fairly, and transparently.
In Chicken Little Eats Crow, Munro reviews the rancorous and widespread opposition to the concept of wireless licence auctions from the inception of the program in the mid 1990s to the most recent auction, held this summer.
“These ‘Chicken Littles’ claimed that the introduction of auctions would cripple service providers, gouge consumers, and eliminate the government’s ability to regulate in the public interest,” says Munro. “And of course there was that reliable neutron bomb of public discourse in Canada: the naysayers claimed that using auctions to assign wireless licences would ‘Americanize’ Canadian communications policy.”
Chicken Little Eats Crow examines those criticisms, plus some newer ones raised during the recently completed auction of licences for Advanced Wireless Services, and determines that the criticisms are not supported by the evidence.
However, the paper does suggest that improvements can be made and it makes five recommendations:
First, Industry Canada should formalize auctions as the one and only means for assigning wireless licences. Currently the Minister of Industry has the discretion to choose an auction process or a “comparative selection and licensing” process to assign spectrum when demand for frequencies exceeds supply. The comparative selection and licensing process is cumbersome, disconnected from market realities, and prone to perceived, if not real, favouritism, and as such it should be removed from the government’s tool-kit.
Second, to provide more consistency in the Canadian communications sector, the CRTC also should adopt auctions for the assignment of broadcasting licences.
Third, Industry Canada should move beyond auctioning licences to a model of property rights in spectrum. In view of the success of its spectrum auction program, Industry Canada should embrace a market-based approach more fully.
Fourth, Industry Canada should upgrade its now outdated spectrum auction software platform. Canadian spectrum auctions are still being run on rules and software developed in the mid 1990s. Since that time, improvements and refinements have been developed elsewhere that allow for faster and more efficient auctions. It is time for Canada to catch up.
Fifth, other government agencies with responsibilities for allocating scarce resources should learn from Industry Canada’s success with sophisticated auction mechanisms and adopt best practices in their own operations. Federal, provincial, and municipal governments buy and sell billions of dollars worth of goods and resources each year, so even a small improvement in the efficiency of these processes could generate substantial benefits for Canadian taxpayers.
To read the complete paper,