Skip Navigation

The Congressional Budget Office (CBO) estimates that auctions of licenses to use the radio spectrum conducted by the Federal Communications Commission (FCC) from 1994 through 1998 will yield $27.0 billion in receipts to the federal Treasury. The apparent success of the initial auctions has generated interest in the potential of auctions to raise additional receipts and enhance the value of the spectrum to society. In response to a request from the House Committee on the Budget, this study examines the results of the initial FCC auctions, the general outlook for future auctions, and the applicability of auctions to the introduction of digital broadcast television. The study also considers the prospects for using auctions and other market mechanisms not only in assigning licenses to specific users but also in allocating frequencies to different uses. In keeping with CBO's mandate to provide objective analysis, the study makes no recommendations.

Coleman Bazelon, Perry Beider, and David Moore of CBO's Natural Resources and Commerce Division wrote the study under the supervision of Jan Paul Acton and Elliot Schwartz. Although the three authors contributed to all sections of the study, David Moore, who coordinated the study, wrote Chapters 2 and 3, Perry Beider wrote Chapter 4, and Coleman Bazelon wrote Chapter 5. Mark Booth, Pete Fontaine, and Rachel Forward of CBO provided helpful comments on drafts of the study. For valuable comments and other assistance with their research, the authors also owe thanks to many professional staff members of the FCC and the National Telecommunications and Information Administration, the participants in a February 1996 roundtable discussion held at CBO, and the following individuals: Peter Cramton, Peter Fannon, Dale Hatfield, Tom Hazlett, Chuck Jackson, John Ledyard, Roger Noll, and David Reed.

Sherry Snyder edited the manuscript, and Marlies Dunson provided editorial assistance. Angela McCollough typed the many drafts, with assistance from Rae Wiseman. Kathryn Quattrone prepared the study for publication.
 

June E. O'Neill
Director
April 1997
 
 

SUMMARY

ONE - INTRODUCTION

• An Overview of Auctions and Spectrum
• Management
• Goals of Spectrum Policy
• Remaining Questions About FCC Auctions
• Aims of This Study

TWO - AUCTIONS HELD BY THE FEDERAL COMMUNICATIONS COMMISSION

• FCC Actions Before the First Auctions
• Did the Auctions Result in an Economically Efficient
• Distribution of Licenses to Use the Radio Spectrum?
• Did the Auctions Achieve the Objective of Awarding
• Licenses to Small Businesses and Businesses That Are Owned by Women and Minorities?
• Were the Auctions More or Less Costly Than Alternative Methods of Assigning Licenses to Use the Radio Spectrum?
• Conclusion

THREE - PROPOSALS AND ESTIMATES FOR FUTURE AUCTIONS

• The Current Allocation of the Spectrum and Directed Reallocations
• CBO's Baseline for the FCC Auctions, 1998-2007
• Estimates of Receipts for Proposals Concerning the FCC Auctions
• Factors Affecting the Prices Paid for FCC Licenses
• Beyond Receipt

FOUR - THE CASE OF DIGITAL TELEVISION

• Broadcast Television in the Digital Age
• Policy Issues
• Six Alternative Policies
• Weighing the Alternatives
• Lessons from the TV Case

FIVE - IMPROVING SPECTRUM MANAGEMENT:

• The Next Steps
• Managing by Market Mechanisms
• Expanding Property Rights in Spectrum
• Extending the Scope of the Market
• Reforming the Management and Use of Federal Spectrum

---