Lessons from the C Block: Auction complexity leads to disastrous consequences for consumers

[Commentary] If we do want to ensure that “smaller’ companies compete in the mobile market, how do we answer the following two questions? 1) Should the government extend corporate welfare to T-Mobile and Sprint -- either in the form of direct subsidization or limits on competing bidders -- to make these firms more competitive in the auctions, and 2) can the Federal Communications Commission effectively micro-manage the auction to get the desired post-auction result?

When examined in the bright light of day, the answer to the first question seems clear. T-Mobile and Sprint are hardly undercapitalized and are likely to be strong competitors in an open auction. The C Block exemplifies how even limited government restrictions can add considerable complexity. Secondly, after the auction, but before the FCC could take a victory lap on how it had simultaneously raised competition and record revenue, the bottom fell out: designated entities couldn’t pay. The FCC quickly instituted a license return policy so that it could collect and re-auction the licenses. Many winners did return the licenses but of course, much damage to consumer welfare had already been done as the time-to-market of spectrum resources was greatly increased.